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Spanish Housing Market Outlook

12 December 05:35 PM

Spain is one of those countries who suffered most from the global financial crisis. It is one of those southern eurozone economies that are on the verge of a major recession. At this point, Spain is the country with the highest rate of unemployment in Europe – almost 25%. As a result, thousands of people start losing their homes as they cannot pay off their mortgage loans anymore.

The Spanish government is trying to restore the economic growth by all means. They are even ready to grant residence permits to those foreigners who will purchase residential property in Spain to the amount of €250 000 or more. They also bet on the tourist sector. It was decided to extend the working hours for those shops that are popular with tourists.

What are the prospects of the Spanish housing market? Let’s have a closer look at the issue.

Expert Opinion: Spanish Housing Market

Eugene Olkhovsky, Masterforex-V Academy’s leading expert in financial markets, reports that since 2007 (the highest level), the Spanish housing market has dropped by some 30%. Since thousands of people failed to pay off their mortgage loans, their homes were expropriated and put for sale. Therefore, a sharp increase in the supply resulted in lower prices. The average cost of 1 square meter of residential property (apartments) was around €1500.

As for today’s situation in the Spanish housing market, experts are at variance. Some of them assume that the weakness is about to be over while other do not agree with them.

Foreigners are actively buying Spanish fixed property while the local population is still waiting for better times. Over the last 3 years, foreign purchases have reached the highest level.

In 2011, foreigners invested some €4.67bn in Spanish fixed property, which is a 27% increase. In Q1 2012, there was a 21% increase s well.

The biggest buyers are citizens of North-European states like Sweden and Norway as well as Russians.

Another category of foreign buyers include retired people from Australia, France, Cyprus , Ireland.

Moreover, the Spanish government is determined to turn Spanish into a heaven for tourists and immigrants thanks to affordable food prices.

Crisis Trends: Consequences and Prospects

Since 2007, Spanish financial institutions have expropriated some 300 000 homes from those who defaulted on their mortgage loans.

Since, January 1st 2013, anyone who would like to purchase residential property in Spain will have to pay a 10% value added tax.

At the same time, experts say that construction companies will face more difficulties next year.

Spanish banks offer mortgage loans up to 25 years at 60%, with a possibility of advanced repayment.

In Q2 2012, the investment inflow in the industry increased by 2.55 (y/y).

Since the housing bubble burst, the aggregate value of Spanish fixed property has declined by €360bn, which is equal to 35% of Spain ’s GDP.

The aggregate amount of transactions in the Spanish housing market has dropped 33% since 2007.

The amount of British buyers of Spanish residential property has declined by 64%.

Is Spanish Residential Property Worth Investing Today?

At this point, the Spanish infrastructure is being developed and reconstructed. In particular, there is a direct train from Alicante to Madrid. Therefore, those who live on the Eastern coast of Spain can reach the capital within several hours. Experts say that this factor may stimulate higher demand for residential property in the region.

Still, they discourage foreigners from investing in Spanish residential property in the near future as they expect housing prices do drop 6% more in 2013, even though the situation on the local housing market seems to be improving.

They also expect the total amount of unsold housing units to drop down to 500 000 by late 2014. Today’s amount varies between 850K and 900K units. 250K of those units belong to banks.

According to Masterforex-V Academy experts, now is a favorable period for purchasing residential property in Spain as the demand is still low and banks need to sell out the expropriated housing assets.

Moreover, the eurozone crisis is still underway. It keeps affecting the economies of Greece, Italy and Spain . At the same time, EURUSD has become more volatile.

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