The Bank of Spain Discards a new “Real Estate Bubble”
The Bank of Spain has published a specific report on the evolution of the housing market as you can see in these charts.
The Bank of Spain remembers that the weight of the sector in the growth is far from maximums, that the price has only risen 16% from minimums, that they sell half of houses that in 2007 and that still few buildings are constructed. In addition, it warns that in the medium term the demand will decline and remember that the reduction of the stock is slow
1. Investment in housing is far from 2007. As far as its weight on GDP is concerned, the current 4.5% is closer to the minimum registered in 2013 (4.1%) than the 2007 (12%).
2. The price has risen 16% after falling more than 30%. The regulator remembers that from minimum has regained a 16%. And that after the bursting of the bubble the price fell to 37% in nominal terms and 45% in real terms.
3. Half of the pre-crisis season is sold. Since 2016, 455,000 sales operations have been carried out according to the notaries, 14% more than a year earlier, but only 50% of those sold between 2004 and 2007. At that time, more than 800,000 transactions were signed each year .
4. Foreigners increasingly buy more houses. The purchase of housing by foreigners has always been part of the sector, although the average now far exceeds that which existed between 2006 and 2013. If at that time foreigners made one out of every 10 purchases, the current ratio amounts to 17 every 100. It is the highest level in history and chains six consecutive years of increases, according to the Ministry of Public Works.
5. You cancel more mortgages than you sign. The agency notes that there is a moderate increase in the number of new mortgages since the beginning of 2015, in a context of gradual reduction of the aggregate level of household indebtedness. ” In addition, he insists that, despite the fact that the contracting of new mortgage loans does not stop growing in inter-annual terms, they are still “not enough to compensate the amortizations”.
6. The start of new housing is still small. Due to increased stock of unsold housing results from the previous expansionary case and the level is well below what was observed during the early recovery phases of the sector, after the crisis of the early 1990s.
7. The stock is slowly absorbed. The evolution of unsold homes, what the sector calls stock. According to Fomento, in 2016 there were still 491,700 unsold homes, and they will be a drag on the good progress of the sector.
8. It is a very heterogeneous market. The Spanish market is evolving at different speeds: it is that demand is not being the same in big cities as in small municipalities or in coastal areas. This explains why prices are growing differently within the national territory and that in Madrid or Barcelona there is scarcely any stock, while in Valencian Community, Catalonia and Andalusia there is a very high quantity (all three regions agglutinate 50% of the stock).
9. The demand will be stopped in the medium term. In the medium term, and taking into account forecasts of demographic trends, “residential demand growth is expected to be more modest than during the previous expansionary cycle, initiated at the end of the last century, in which this variable behaved very dynamic way “.
(Source: INE / M º Fomento / Idealista)