House prices up by 2.9% and sales by 13.3% as 2016 proves another positive year for property

Figures for this year are only generally available up to September, but report a 13.3% year-on-year hike and a total of 391,126 residential properties being shifted in the 12 months prior.

Of these, eight in 10 were second-hand homes, up by 25%, whilst new builds are declining in popularity with figures down from last year by 2.3%.

As for housing values, quantity surveyors Tinsa reports an average rise of 2.9% until September, whilst Eurostat points at a 2.6% increase nationwide for the first two quarters of 2016.

But property values in Spain vary so vastly it is difficult to give concrete figures; homes in tourism belts and major cities continue to climb and sell rapidly, whilst those in smaller towns and inland areas remain stagnant and spend longer on the market.

Prices may be about to stagnate, however, says Felipe Rufino, who runs an online valuation calculator.

“As we have observed in our research on home prices, although in some towns the value hike has been somewhat steep, the general trend in the second half of 2016 is for a more contained and discreet price rise which appears to confirm a slowdown in the market; possibly because of the recent political stalemate,” Rufino says, referring to Spain's 11 months without a government.

Beyond the figures in black and white, experts concur that the property market in Spain is 'very fragmented and uneven'.

“We're seeing a two-speed market at the moment,” says Fernando Encinar, co-founder and research manager for a property sales website.

“On the one hand, we have the big markets with Madrid and Barcelona in the lead, and the premium tourism areas where prices have been on the up for months already, the number of sales and purchases constantly growing and the number of mortgages granted rising.

“On the other hand, in inland areas where demand has not taken off, we're still seeing price falls.

“Although some specific markets might show stagnation, it's unlikely that in the short term we'll see a revival of demand forcing these value patterns to reverse.”

Rufino says it is difficult to predict how the market will develop in the medium- to long-term future.

“Rather than focusing on which areas are seeing an increase in sales – given that this will always rise in areas with the most properties – what really reflects the supply-demand balance is sale price,” he explains.

“Price rises tell you that demand is increasing, and supply has been unable to absorb it; a situation which can lead to abrupt reversals in trend, as we saw during the last property boom.

“At present, we're noticing price hikes in the main cities, but we should stress here that, within these same metropolitan areas, there are neighbourhoods where prices rise and others where they fall.

“For example, in Madrid, the majority of homes are increasing in value, but a few are actually going down, so you can only really determine market trends by neighbourhoods, not by the country as a whole, regions, or even individual towns.

“This said, Catalunya, Madrid, the Balearic and Canary Islands and the Mediterranean basin are the areas which continue to be the most dynamic markets.”

Price indicators can be inferred from mortgage-lending figures, too, Rufino says.

And according to the National Statistics Institute (INE), the most recent data – from July – showed the average new mortgage to be €115,540, or 14% higher than a year previously.

For a first residence, the majority of lenders will not offer more than 80% loan-to-value, or 60% for a second or subsequent residence.

Most take the lower of either the market value or the purchase price.

Buyers need to add around 12.5% to the price when budgeting, to cover taxes, fees and charges.

Mortgage repayment quotas continue in freefall as the Eurozone exchange rate, the Euribor, has been gradually sinking since 2008 and, lately, has been in negative figures.

For several years now, variable-rate mortgages – which are adjusted annually – have been getting cheaper with each annual review.