Two-year rise in home sales as investment property interest returns

INTEREST in residential property purchases as second homes, a place to live and, increasingly, as an investment is continuing to rise after two solid years of gradual growth, according to the National Institute of Statistics and a number of leading estate agencies.

The general view across the industry is that recovery in the housing market became stronger than ever in 2018 after it started to become consolidated two years ago.

Professionals in the sector attribute this to an improved economic climate and greater ease of obtaining mortgage finance.

Property is once again being considered a sound source of investment and asset acquisition, say estate agencies – a view that fell out of favour during the years of the financial crisis when home values were in freefall after having risen disproportionately – by late 2007, a typical residential property had doubled its average purchase price in four years, but by 2010, it would have been back to a similar value as in 2004, meaning anyone who bought just before the crisis would have lost money if they had chosen to sell.

This is no longer the case, as home prices are now rising by percentages in two figures in many of the more sought-after areas, and the consensus among at least three leading estate agencies is that the cost of buying a residential property is increasing at a pace 'well above' wage rises.

They say Spanish residents have not recovered the same spending power as they had prior to the financial crisis, meaning they are starting to be priced out of the housing market.

This year, home value rises peaked in April at 17.4%, and then an increase of 15.8% was seen again in October.

In between, and since, agencies reported a plateau in the market, but not due to lack of interest – more a case of supply and demand both being high and approximately equal.

This has meant that although the increase in sales volume was 11.4% in the first 10 months of the year, it slowed down to 1.8% between September and October.

However, the deceleration seen is also seasonal: spring and summer are often the most buoyant times in coastal areas, especially among foreign buyers, who continue to make up a very large slice of the market.

Sales volumes have been rising consistently now for seven months – in October, only 15,000 fewer properties changed hands than in the same month in 2007, at the height of the housing boom and just weeks before its sudden collapse.

The vast majority of homes purchased in October, the most recent month for which records are complete, were second-hand – 81.7% in total – with just 18.3% being new builds, although the rise in sales of both types were very similar, at 15.3% for new builds ant 15.9% for second-hand homes, giving an average of 15.8% overall for the month.

Sales of new builds have been on the up for 17 of the past 18 months, whilst second-hand home purchases have been increasing for 54 out of the last 56 months, or four-and-a-half years in total out of four years and eight months.

Coastal tourist belts are seeing a slowdown, although still rising gradually in most cases – except in Murcia, a relatively mature holiday and expat hotspot but one which never saw the same furore as traditional destinations such as the Costa Blanca and Costa del Sol.

In Murcia, home sales rocketed by 51.2% in October, way ahead of the second- and third-largest rises seen in the land-locked northern regions of Navarra (41.3%) and La Rioja (35.6%).

The Canary and Balearic Islands reported a shrinking of the market by 6.8% and 5.2% respectively, whilst in the mostly-rural region of Aragón, home sales dropped by 0.7%.

Demand in big cities remains high, although no real growth was seen year-on-year in Madrid.

Catalunya home sales have not been affected by the ongoing independence struggle; in fact, as the region which is home to Spain's second-largest city, Barcelona, it has been thriving: across its four provinces, property sales shot up by 23.5% in October 2018 compared with figures reported in October 2017.

Overall, property sales experts are very clear in their current summing-up of the housing market: interest in acquiring bricks and mortar as an investment is back, and growing.