Banks and real estate servicers forecast a steady rise in house prices for the foreseeable future, though market liquidity is still a big problem in many parts of Spain.
Solvia – the property division of Sabadell bank, and also a big real estate servicer with clients like the Sareb (so-called ‘Bad Bank’) – forecasts, in its latest report on the market, that average Spanish house prices will rise by 7.3% between now and 2020, though with wide regional variations. For its part the Spanish bank Bankinter forecasts house prices up 4% this year, and between 4% and 5% next year.
Regions with the strongest demand and economies, like Catalonia and Madrid, will see prices rise by 11% and 14% respectively, driven by rising local demand and tourism, say Solvia.
Spain is back in a cycle of housing market growth, argues Sovlia’s report, whilst pointing out that growth is not uniform around Spain, and will not look anything like the last time the Spanish housing market was in the growth part of the cycle – the boom years of 2002 to 2008. Big markets like Barcelona and Madrid are driving the average price up, whilst house prices are still falling in many areas.
Turning to transactions, Solvia forecasts growth of between 7% and 8% each year to 564,000 home sales in 2020, in contrast to Bankinter, who forecast sales up to 550,000 as early as next year.
Solvia forecast that new home starts will rise from 64,000 last year to 110,000 in 2020, mainly in area like Barcelona, Madrid, Seville, Malaga and Alicante, where demand is strongest. Other forecasts for home building activity in the next few years are more bullish.
Liquidity Trap
Solvia also researched the liquidity of Spain’s housing market for their latest report. Liquidity determines how quickly a property can be turned into cash, and Solvia reveal that just 10% of Spanish postcodes can be described as liquid or very liquid (easy to find a buyer at market price), whilst 78% of postcodes are either illiquid or very illiquid.
Buyers, especially foreign buyers, should pay close attention to market liquidity when buying a home in Spain. Buyers in more illiquid areas need lower prices to compensate for the risk of struggling to find a buyer when the time comes to sell.
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