Property price growth in some Spanish regions gives hope of boost in 2014

The outlook for the Spanish property market is looking more positive for 2014 with the latest  official figures for the third quarter of 2013 showing that house prices in four Spanish regions are now on the rise.

The Balearics lead the way with 4.4% annual growth year on year. The other three regions seeing prices rises were Navarra with growth of 2.8%, Extremadura up 2.2% and Madrid up 0.3%.

But overall the House Price Index, published by the National Institute of Statistics, shows a quarterly fall of 0.4% and an annual fall of 4.5% year on year, although this is the smallest decline since the end of 2010. Rioja has seen the steepest price decline at 12%.
According to Chavarria Waschke, managing director of Balearics Sotheby’s International Realty which has offices in Mallorca and Ibiza, the upward trend should continue for 2014 in the region.

‘The factors that kept these Mediterranean islands buoyant in recession, are the same as those fuelling price rises today, lack of supply and appeal across the nationalities. Ibiza and Mallorca were never overbuilt, planning controls have always been much tighter, and as a result we have never had an oversupply to sell off,’ he explained.

He also pointed out that foreign ownership is still strong and has doubled over the last five year with British, Dutch, German, Danish, and Swedish buyers keen to secure a home in the Balearics. The latest data shows that up until June this year, 1,412 foreigners had purchased homes, almost the same as the whole of 2008. According to Waschke they are propping up the Islands’ market.

The Council of Notaries reveals that Germans are out front in this trend, making three times the number of house purchases in 2012. There are still a lot of British buyers but interest from Russian and Nordic buyers is rising.
For example only 27 properties were bought by Swedes in 2008, rising to 168 in 2012 and already 75 in the first six months of 2013. In 2008 there were 35 Russian purchases, by 2012 this figure was 86. Interest is also increasing from Chinese, Romanian, Argentinean, French and Italian buyers.

Figures from the General Council of Notaires show a small quarterly rise of 0.7%, the first quarterly rise in three years and this could be taken as a sign that the housing market is bottoming out. But how well the Spanish market is doing is a matter of debate.

For example, Mark Stucklin of Spanish Property Insight believes that a small quarterly increase does not herald the end of the Spanish house price crash as is being reported in the Spanish press.

‘After years of reporting nothing but bad news, I understand why the media might jump on the slightest bit of good news, if only to report something different for once, I do it myself. But the optimism is premature and there are various reasons why it’s still too early celebrate the end of the great Spanish house price crash,’ he said.

‘Firstly, this was just a quarterly increase, and you have to be careful comparing quarters. A more important comparison is the year on year figure, which was down 7.9%, so house prices are still falling substantially, albeit at a slower rate than before,’ he explained.

‘Secondly, transaction levels are now so low the average price can easily be pushed up or down by a relatively small number of sales. As the notaries recently pointed out, fewer transactions means the index has become more volatile, making it difficult to draw conclusions.

‘Thirdly, the price increase was driven by sales of newly built homes which saw prices up 2.3%, most of which were repossessed by banks and sold with a price premium thanks to preferential financing that private vendors can’t match. In such a thin market this distortion can have an impact on the index,’ he added.

Whilst some experts predict more price falls for Spain in 2014, or at best stabilisation, Waschke predicts more price rises for the Balearics. ‘Each month we are listing more and more expensive homes. In Mallorca the seven, eight, nine, ten million euro plus category is growing and properties in the best locations with the finest qualities and move in décor are being snapped up, even at those prices,’ he said.

‘Meanwhile in Ibiza, a luxury developer on the west coast has instigated two price hikes at his million euro plus villa project this year as phase one sold out in a matter of months.  I think the Balearics really are the exception to the Spanish rule,’ he added.

Marc Pritchard, sales and marketing manager of Taylor Wimpey España also suggests that the Spanish market will move in a positive direction in 2014. ‘Sale prices in Spain for quality properties in prime locations could be nearing the end of their fall according to several reports released in recent weeks. Indeed, the Ministry of Development reported that during the third quarter of 2013, homes recorded their lowest drop since 2010, even becoming more expensive in several regions,’ he said.

He pointed out that properties in less popular inland locations which have reduced infrastructure or no views will drop further in price, but he added that overall the perception that the housing market is nearing the end of its adjustment is gaining in popularity. For example, according to the Consumer Confidence Indicator for November, prepared by the Centre for Sociological Research, 46.4% of those surveyed think that Spanish housing prices will stabilise over the next year, signalling a boost of confidence in the market.

His firm experienced a huge increase of sales across the Costa del Sol, Mallorca and the Costa Blanca over the last 12 months. ‘We are expecting sales levels in 2014 to be in line with 2013 however seeing as we will have additional sales outlets and several new developments in the pipeline across all three regions of Spain in which we operate, coupled with the fact that prices in prime locations across each area have now bottomed out and will not fall any further, we are hoping sales volumes to increase making for an exciting new year,’ he explained.

He also expects that 2014 is likely to see a surge of interest from foreign buyers outside the EU from countries such as China, Russia and the Middle East investing their money in Spanish property due to the golden visa scheme for property investors outside the European Union investing a minimum of €500,000 in real estate.