A HOUSING market 'boom' at a most unlikely time and one that's not expected to turn to 'bust' means the immediate future seems bright for those in the property trade or planning to rent or sell their home – and experts in the field have revealed what's been happening in the past couple of months, and what they think the New Year will bring.
Figures for the very end of 2021 have not yet been released – when they do, a full analysis of the past year can be conducted – but from what we know so far from National Statistics Institute (INE) data, over 530,000 sales in the previous 12 months, despite the pandemic, are known to have been closed.
This is the highest ever seen since the year 2008 when the early-Millennium property 'bubble' burst spectacularly, and number-crunchers specialising in the property market believe this industry has entered a new 'Golden Age'.
Lessons were learned last time, though, so there seems to be far less danger of a subsequent implosion; home value rises are more gradual and realistic, and banks more cautious about lending money to buy them, whilst the 'building fever' of the first five years of the century looks unlikely to return. Back at the time of the 'crash' which began in 2008, inflated residential property prices, excess of supply and a subsequent downturn in jobs in the construction industry were what turned the tables, but greater prudence has been exercised since then, along with an historically-low Euribor, or Eurozone interest rate, keeping mortgages much more affordable than 14 years ago.
Apartments versus houses: Sale volume and value rises
The last full month for which the INE has figure available is November 2021, when a year-on-year increase in sales and purchase transactions of 25.9% was reported – a total of 63,080 homes changed hands, of which two-thirds were flats or apartments.
Residence in apartments, particularly in built-up areas, typically exceeds the number of people living in houses, whether these are terraces or detached; flats are generally more ubiquitous in main hubs of towns or villages and in cities, so buying one would not typically be considered a 'stepping stone' on the way to being able to 'afford' a house, as in some other countries. As a general rule, apartments in Spain are spacious, nearly always with a minimum of two bedrooms, multiple bathrooms are the norm rather than the exception, and many of them are extremely large and luxurious; they can often, in fact, be much larger inside than a detached villa.
And the number sold in November rose by 30.2% based upon the same month in 2020, totalling 47,610, showing that they remain immensely popular.
Houses, rather than flats, also experienced a sharp rise – November 2021 sales rose year on year by 14.5%, accounting for 15,470 that month alone.
Contrary to widespread belief outside of Spain, apartments were worth more per square metre and saw the greatest price rise in November 2021 – their value rose by 3.8%, to an average of €1,675 per square metre, compared with houses, whose value increased by 12.8% based upon the previous November, averaging €1,212 per square metre.
Overall, the average property in Spain went up in value by 7.4% to a typical €1,502 per square metre.
Of course, regional variation, and even variation by towns just a short distance apart, means the figure per square metre is academic. The range of prices nationwide is huge, from a fraction of the 'average' to multiple times this, meaning almost every budget is still catered for during this new 'Golden Age' – unlike in 2008.
For the forthcoming year, property market analysts predict an across-the-board average rise of 4% in home-buying prices, even taking into account the uncertainty in financial terms created by the pandemic, but are not expecting much more except in areas of high demand and low availability.
Last year, these same experts reported a value increase of 4.3%, meaning the situation remains stable, and estate agencies say the trend is 'good news'.
Where demand is highest for homes
Low availability and high demand, which may force prices up above the average, is typically being seen in the outskirts of Spain's largest cities, such as Madrid, Barcelona and Valencia.
Otherwise, demand is starting to climb in the polar opposite locations: Country homes and villas with their own land have soared in value by around 30% in the past two years, since the start of the pandemic.
This is widely held to have been triggered by lockdown 2020, when residents were forced to remain at home except for essential errands, even banned from communal areas except for necessary access, meaning many began to reconsider where they wanted to live.
At this point, estate agents saw a spike in requests for properties with gardens, terraces, and private swimming pools, and more indoor and outdoor space in general.
Property purchases increase in every region
Although property purchases increased year on year in every region in Spain, the greatest annual growth as at the end of November 2021 was seen in the Balearic Islands, with an incredible 58.4% rise, followed by the land-locked northern region of La Rioja at 49.2%, the Canary Islands at 42.7%, the southernmost mainland region of Andalucía and the wider Madrid region, both at 31.8%, and the east-coast region of the Comunidad Valenciana, at 30.6% higher.
Below the national average property sales growth of 25.9% was the northern region of Navarra (25.3%); Murcia, on the south-east coast (24.6%); Galicia in the far north-west (24.2%); the centre-northern region of Castilla y León (22%); Asturias, on the north coast (21.1%); Catalunya in the north-east, three-quarters of which is on the coast (19%); and the central plains of Castilla-La Mancha (15.8%).
Despite not reaching the national average, the increases in home purchases in all these areas were still high, especially for a traditionally off-peak time of year.
Those which did not break into double figures were the mostly-rural, inland north-eastern region of Aragón (up 8.2%), Cantabria, on the north coast (7.4%), the Basque Country (5.2%), and the far-western region of Extremadura (1.2%).
Home values rose most in coastal areas in 2021
Over 2021 as a whole – for as far as figures are available – home prices went up in 14 out of 17 regions; the other two regions, Ceuta and Melilla, which are single cities, have not been included in the figures released.
As for provincial capital cities, Bilbao and Málaga saw value rises well above the national average of 4.3% - in the former, 13.7%, and in the latter, 9.8% - whilst Sevilla (6.2%) and Madrid (5.8%) beat the average by a smaller margin.
Other large metropolitan areas saw a more pedestrian price growth – such as Valencia (4.2%), Barcelona (2.9%) and Zaragoza (0.9%).
The only cities where home values actually fell were those in relatively sparsely-populated provinces, such as the Pyrénéen capital of Huesca, where prices dropped by 2.8%, and the Castilla y León cities of Soria and Palencia, where prices shrank by 4.2% and 13.2% respectively.
By region, increases in home values per square metre in November 2021, compared with November 2020, were greatest in the Comunidad Valenciana, shooting up by a whole 14.2%, beating the capital, Madrid's 14%.
Murcia, Catalunya, the Canary Islands and the Balearic Islands also saw significant residential property value hikes – 13.3% for the south-eastern region, 12.4% and 12% for Catalunya and the Canaries, and 11.6% in the Mediterranean islands.
Andalucía registered a fairly considerable 9.5% increase, showing that some of the largest climbs in property prices were in regions that were either on the coast or home to Spain's top three cities, or both.
Aragón, even though its growth in property purchases was below the national average, the region's rise in property values was above the national average – 6.7% - since, although it is mostly rural with a very thinly-spread population, Aragón is home to Spain's fifth-largest city, Zaragoza.
Regions with below-average home price growth throughout 2021 were either land-locked or far-northern, or both: Castilla-La Mancha reported a 3.8% rise; Asturias, 3.6%; Cantabria, 3%; Galicia, 1.6%; Navarra, 1.2%, and Castilla y León, 1%.
Only three regions saw residential property prices fall in 2021: La Rioja, where they plummeted by 22.4%; Extremadura, by 7.6%, and the Basque Country, by 5%.
More savings, more mortgages: November saw 1,000 new home loans a day
Swelling household savings caused firstly by lockdown and then ongoing restrictions on leisure activity have been cited as one of the reasons behind the housing market growth – unable to spend 'surplus' cash when hospitality, retail, travel and entertainment industries were operating at a much-reduced level, middle- and high-income families and individuals were more likely to have amassed a small pot to be able to put towards buying a home more suited to their chosen lifestyle, according to several studies.
One of these was CaixaBank Research Centre, which has also attributed home price rises towards the end of 2021 to more expensive raw materials and obstacles affecting international trade and transport – although these issues would only explain price inflation in new builds rather than existing, established property.
Expanding piggy-banks may also have influenced the rise in new mortgage deals in the past year, given that those with limited equity or first-time buyers would have been able to put aside more towards a deposit enabling them to get a home loan.
Generally, in Spain, for a main residence, banks will only lend 80% of either the surveyed value or the selling price, whichever is lower, or 60% for a second or subsequent home, then buyers need to factor in about another 10% to 12.5% for fees and taxes on top.
The fees are lower with cash purchases, since they do not involve mortgage set-up costs.
In November 2021, compared with the same month in 2020, new mortgages for buying a property – as opposed to remortgages, or secured loans for renovations or extensions – rose by 8.3%, with just under 30,000 deals closed; an average of 1,000 mortgages granted a day, according to INE data.
The typical loan amount was just over €142,000, being 1.9% higher than in the same month the previous year.
On average, mortgages were to cover 73.5% of the value of the desired property.
But buying outright rather than via a home loan accounted for more than half of all purchases in November – a total of 47.3% of new owners took out a mortgage to buy their home, with the rest doing so in cash.
Price of renting set to continue to fall
Rent costs have been a thorny subject for some time in Spain's biggest cities, with even moves to put a cap on what landlords can charge; generally, these caps affect multiple property-owners who let them professionally and who tend to be large companies, rather than an individual with a couple of buy-to-lets occupied by tenants as a future investment.
And in the most expensive areas to rent, estate agencies are predicting tenants will be paying less over 2022.
Madrid and Barcelona cities, especially, are predicted to see rent prices fall, causing a national average reduction of around 4% this year, following a trend that started towards the close of 2020.
As at the end of 2021, INE data show that average rent prices for Spain as a whole had gone down by 4.5%, after 12 months on the trot of consistently dropping.
It still works out cheaper to buy rather than to rent in terms of monthly outgoings in most of Spain, although the gap is predicted to close slightly in 2022, meaning other considerations, such as mobility versus long-term investment, will come to the forefront when deciding which route to take.
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