Why are Spanish house prices rising?

In News by redsocks

In an article, TT explains why Spain is on the move.

Pointing out that the Spanish housing market is growing again after years of declines, with prices up 4% in most areas and a staggering 14% over 12 months to the end of the fourth quarter 2019.

We explain the factors pushing up house prices, whilst assuring us that we are nowhere near another housing bubble, as all the key market variables like sales, prices, housing starts, and housing affordability are still a long way from the levels reached in 2006 and 2007.

Homes are relatively cheap.

In real terms (after inflation) the majority of Spanish homes now cost half what they did in 2007, and are roughly back to what they were worth in 2002 before the boom got going. H&G says Spanish property is now a “magnificent opportunity”, which will probably appreciate at price. We forecast that Spanish house prices will rise by 8-12% in some areas in 2020. 

The willingness of banks to lend more mortgages.

Banks today are awash with liquidity and struggling to earn good margins on lending. They have to make up for thin margins with higher lending volumes. Mortgages loans are less risky than other types of credit, and help lock in clients to cross-sell other financial products. That explains why new mortgage lending rose 28.5% in July 2019.

Housing is the best investment.

That’s what many risk-averse investors now think, looking at the miserly returns on deposits, at the Banks

In most Europe many of whom are at 0% in real terms, Spanish Property is a fantastic bet.

In middle and upmarket city districts, housing offers a mix of high expected capital gains (up to 30% over the next 6 years), and rental yields of around (4-5%today), better than all of your high street savings accounts.

We can still buy a rental property for as little as 75k, as such you do not need to be a millionaire to get involved.

Switching from renting to buying.

Many households sat out the crisis in rented accommodation, waiting for house prices to bottom out, mortgages to get cheaper, and the economy to pick up, argues H&Gs. Now that those conditions are all coming true, Spanish families are jumping back into the market, unleashing pent up demand.

“A new stage of the housing market has definitely begun,” concludes H&G. “In this stage, very cheap homes (in municipalities in the middle of nowhere) will continue to exist, whilst others will become very expensive (in the best areas of the big cities and top-end beach resorts).

Spain is now a far safer bet than it ever has been the boom and bust of recent years is a thing of the past. Lessons have been learned”