Analysing comments from different experts on Spanish real estate, 2019 appears as the year of recuperation as Price increases between 4% and 6%.
The end of this year is approaching and although we had taken a look of what has happened in the sector in these year that is now ending, it is also time to address the forecasts and tasks that the market should undertake in the next 12 months.
This year, as predicted by different agents of the sector, has been that the year of the consolidation. By 2019, about to begin, the majority of property developers and experts consulted predict that it will be a consistency on the market, but also a moderation on price stabilization.
2019. This is the year
This has been the best year for the housing market since the crisis broke out and we expect that trend to continue in 2019, although in more moderate terms.
There are figures from BBVA Research, which illustrate that it is indeed a good moment. The start of the recovery of the real estate sector was something different and, on this occasion, that recovery has been supported by the good moment of the economy, when the usual was the reverse: that the construction sector propitiated the first advances in the economy after a period of contraction of the industry.
During this year the real estate sector has once again grown in all areas and demand will rise by around 10% over the previous year, which will mean almost the sale of 590,000 homes.
But, in addition to these good figures for the year that now concludes and the good prospects for 2019, other real estate agents understand that the next will be the year of the maturity of a fundamental sector for the national economy.
Spain has reached a point of maturity in which we do not expect large increases in activity, but it does consolidate or slightly improve the figures in the new construction promotion business.
This new cycle is marked by a protagonist who, in earlier times, was not so present: the client. He will continue to be the axis alongside innovation and sustainability, on which different promoters are already working on, to cover even more the needs of these future owners. There has been increasingly new offer of green, modern, smart and fully adapted properties to the new demands of the client.
What about prices?
One of the main indicators to measure the health of the real estate sector is the price of houses. By 2019, according to the experts analysed, this parameter will remain upward but in a more moderate way.
Regarding second-hand flats, according to the Real Estate Index of Fotocasa, 2018 will close with an average annual price increase of 7.8%, the highest level since 2006, when it closed with an increase of 7.7%.
“The behaviour of prices remains very uneven and in 2018 the differences between territories have been further marked, with the Community of Madrid, Catalonia and the islands leading the increases with year-on-year increases ranging between 10% in Catalonia 19,5% of Madrid, these increases contrast with the more moderate behaviour of the rest of the country and with the red numbers still registered in some regions “, explains Toribio.
The Director of Studies of Fotocasa highlights, in addition, that “although these percentage rises are reminiscent of the years of the boom, the average price of second-hand housing is still 36.7% below the maximum of those years and is to 2013 levels according to the zone, this, together with the control of financing and the stabilization towards which the market tends, distances the possibility of a real estate bubble “.
Looking ahead to next year, Fotocasa argues that this sector will continue to grow at a good pace and prices will continue their upward trend although they will stabilize.
All the forecasts indicate increases between 4% and 6%
Carlos Zamora, residential director of Knight Frank, points out that “prices are around 1,800 euros per square meter in new construction and about 1,600 euros in second hand, and by 2019 we expect the growth experienced in some cities such as Madrid and Barcelona to soften, while the recovery in other markets is consolidated”.
Tinsa, which handles an increase in prices of 5%, predict that there will be a “gradual stabilization in Madrid, Barcelona and other cities with notable recent increases, and continuity of increase in their urban areas, in the rest of territories you can register possible moderate increases, “explains Rafael Gil, director of the Tinsa Studies Service.
From Aedas Homes, its CEO, David Martinez, says: “We expect and want healthy increases around 3%, 4% and 5% national average.” Obviously, and due to the high heterogeneity of the market, there will be locations where they increase at a higher rate and others in which the increases will be softer, since Aedas Homes we defend a sustainable growth that makes possible a good and correct functioning of the market “.
We based ourselves on statistics from the BBVA Bank Research department and obtained information from the main Spanish real estate portals such as Fotocasa, those figures show mainly that there is a big gap in prices between big cities such as Madrid, Barcelona, Valencia etc compared with a more moderate behaviour of the rest of the country and with the red numbers still registered in some regions.
However taken all the information there is no doubt that the market is getting slowly back on its feet in 2018.
Purchase and Sale in 2018 and 2019
In the year that is about to end, good figures have also been obtained in terms of sales transactions, although most of them have been on used homes.
According to the latest data of the Spanish Real Estate Registry Statistics, corresponding to the third quarter of 2018, during this period 133,295 purchases were made. In an inter-annual calculation, 508,402 operations were registered, 420.699 of them on second hand houses. Thus, in the absence of knowing the final figures for end of the year, (they are normally published one month after the end of the year) everything points to an end figure of about 600,000 real estate transactions.
But what will happen next year? According to the national director of Residential and Land CBRE, the forecast is that in 2019, most probably we will reach an amount between 625,000 and 645,000 units sold.
The data proposed by Population coincide with those provided by the director of Estudios from Tinsa, which forecasts an annual increase in these operations of more than 5%, reaching more than 625,000 transactions.
Sociedad de Tasación, stresses that the market for second-hand housing continues to have an important weight, mainly in the segments of the population that are considering a first home, due to the dysfunctionality among the new housing prices and salaries that allow access to it.
At this point, Guillermo Llibre, CEO of Housell, argues that one of the main reasons why the sale of homes has experienced an unstoppable escalation in 2018, “has to do with the rise in the price of lets. This, the demand has also changed: buyers of all ages have gone on to see the option to rent as an unnecessary expense, and bet on the purchase as the best possible long-term investment. ” and I tend to agree with him hundred percent.
Projects on the pipeline
From figures obtained from our College of Architects, they point out that there are around 100,000 new housing being lodged for building license, which is about 25% more than in 2016.
It is an important increase by all means, similar to the previous year. However, the levels here are still relatively low, and the housing presented to the local authorities to obtain building license for 2018 will scarcely account for 13% of those projects presented between 2004 and 2006.
Undoubtedly, one of the most important challenges for next year will be to achieve, at least, a certain balance between supply and demand. The market consensus is that Spain needs between 120,000 and 140,000 new homes a year, these demand figures are much higher than the 50,000 homes that are finishing each year and are presented for building licenses: I foresee that little by little the real estate sector will be approaching that point of equilibrium with respect to the production of new housing.
The demand is still solvent and stable, which is why they will continue to produce releases in an important way. However, I admit that there are places where the finalist soil is scarce for example, Madrid and where new construction will grow in the short term, but we must also worry about obtaining new land and generate land with planning permission on which to build the following years.
Land with planning permission
That will be, as has happened in previous years, the main headache of the building sector: the lack of land. Above all, especially in key areas such as Madrid, Barcelona, Andalusia or the Basque Country, all of them with high demand. A problem that, adds to the slowness of the procedures of the local authorities to obtain planning permission, which must be solved with negotiation and understanding by all parties.
I think that the local authorities begin to be aware of the need to put new land in the pipe line to increase the supply of new building work. However, I hope that we all involved one way or another in the building industry have learned the lesson, that we cannot go back to create another bubble as in 2007.