RESIDENTIAL property prices registered the smallest price reduction in eight years over 2015, and are expected to rise by between 6% and 6.3% this year.

Managing director of estate agency business for the Caixa bank's properties, Juan Carlos Álvarez, says in addition to this predicted average rise, some areas of Spain are seeing 'quite significante increases' and even new developments being built for the first time since before the financial crisis.

And although small towns and villages are still seeing price falls – albeit less marked than in previous years – home values are shooting up in major cities.

Barcelona and Madrid have seen price increases in the past year which are expected to continue, says Álvarez.

This, naturally, is likely to create a knock-on effect on homes in the provinces, with those becoming priced out of the market in metropolitan areas seeking property further afield.

Álvarez predicts 2016 will see an increase of 13% in the number of homes changing hands, and renting is becoming more popular than ever before.

Tenants have doubled in number since the year 2000, largely because of a change in culture – an estimated 85% of homes in Spain are owner-occupied at present – and renting still has plenty of margin to rise in popularity, particularly as prices have fallen.

And with young adults facing having to move further from home to find jobs, they are tending to think twice before buying a house and becoming tied to a given area, Álvarez explains.

'Bottomed out'

Last year saw some of the least-dramatic price falls in housing in Spain, with five out of the 17 regions registering increases, says estate agency chain Fotocasa.

The Balearics led the field with an average rise of 3.3%, followed by La Rioja at 2.4%, Madrid at 1.4% and Andalucía and Galicia at 0.7%.

This indicates now is a good time to buy, especially for a long-term investment – and particularly coupled with figures that suggest Spain's homes are currently the most undervalued in Europe.

Completely the opposite situation was in place in 2007 – in fact, since April that year, a time when property values were unrealistically inflated, home prices have plummeted by 45.2%.

Over 2015, Fotocasa analysed property values in 719 towns, villages and cities, and found these had increased in 266 of them – a stark difference to 2014, when increases were only seen in 18 of them.

The average price per square metre at the end of 2014 stood at €1,632, meaning a medium-to-large three-bed apartment would have come in at €163,200 – but regional variations are drastic, with some at double this price and others at less than a quarter.

In the 12 months that followed, the average price per square metre fell to €1,619, or €161,900 for the aforementioned apartment – a decrease of just 0.8%, compared with the previous year's average fall of 5.7%.

The average price per square metre reached an historic peak in April 2007, at €2,952 – meaning the above-mentioned apartment would have cost €295,200.

Since then, the record for price falls was held by La Rioja, where properties plummeted in value by 55.1%, followed by Castilla-La Mancha (52.6%), Navarra (52.5%), Aragón (52%), Murcia (49.9%) and Valencia (48.3%).

The least-affected were the Balearics (33.1%) and Galicia (31.5%).

Head of research at Fotocasa Beatriz Toribio said at the end of last year: “We're seeing a dual-speed market at the moment – whilst home prices in regions such as Catalunya, Madrid and the Balearics have already bottomed out, less-populous land-locked regions like Castilla-La Mancha and Extremadura still have a way to go; and whilst Madrid city and Barcelona are seeing a price recovery, their suburbs are showing a less-equal evolution.”

Those towns where prices rose the most over 2015 were Torroella de Montgrí in the province of Girona, at 22.9%, followed by Santa Eulària des Riu in Ibiza, at 21.1% and Campos in southern Mallorca at 20.9%.

Two others which registered significant price rises last year were Barreiros, in the province of Lugo, Galicia at 20.4%, and Cuarte de Huerva in the province of Zaragoza, Aragón, at 20.3%.