The evolution of the real estate market in Spain has continued its course, although experts say that the bubble which emerged before the crisis will not return - at least it is not expected to according to the data carried out by these researchers. The current situation has set the foundations in Spain and indeed the low property prices continue and will remain below the the real estate price bubble.
Taking into account this same line of prices and as established by the Ministry of Development, it seems that at the beginning of the next decade, the price per square metre would be over €1800. At the beginning of 2014 when the financial crisis was already at its peak, the price per square metre was clearly lower, with a minimum of € 1460 per square metre. There is also a significant gap from the property price bubble. In fact, in 2007 and 2008, the average price of homes in Spain was more than €2000 per square metre.
It is a rule of three. Currently, the price is below the level reached in 2007, by 24 per cent to be exact, although, as confirmed the US firm's report, in 2021 the level will be even lower, specifically up to 12 per cent.
As with the current market, there is no symptom that explains the appearance of a new real estate bubble. In the big cities, as it happens in Madrid, there is a different rhythm occurring. In none of the cases has the excess that occurred just before the crisis been detected.
In the capital, certain neighbourhoods have registered prices that are 10 per cent below the maximum of what they were during the real estate bubble. In contrast there are 23 cities, whose prices continue to fall. In fact, there are no obvious signs that prices have picked up and the most notable decreases are in Cáceres with 9.2 per cent, Ciudad Real with 11.9 per cent and Guadalaja with 6.3 per cent.
In Spain, a moderate price growth is being reached. The beginning of the recovery process is appearing, but in a proportionate way and not at all excessive. In fact, the price increase is focused on the city of Madrid. In certain areas of Spain, such as Alicante, Malaga, and Catalonia, the prices are increasing moderately, while Palma de Mallorca is just behind Madrid as the capital with the highest year-on-year rise (14.5 per cent).
The focus of attention is on Madrid, in certain districts that have approached the maximum registered during the real estate boom. The Moratalaz area, the Salamanca district and the downtown area are those that have registered an increase that exceeds 20 per cent. The following districts have also experienced almost the same price increases: Vicálvaro, Chamberí, Arganzuela and Retiro.
When talking about the average price per district, the neighbourhood of Salamanca in Madrid takes the lead. The average price per square metre is €4734, although Chamberí and the centre of town also exceed €4000 / sqm. The difference between the different capitals in Spain is a reality. Although we must also say that, in general, Madrid has recovered from the crisis by a third, only in the most popular districts it has done so by 85 per cent. This is basically due to tourism, and the investment in these areas is greater as the rental and sales prices go up.
The market data speaks loud and clear, although they also reveal other information. For example, in 2006 a total of 95,0000 property purchase transactions were successfully completed. However, last year around 54,0000 have been formalised. In the first case, the banks were more secure and granted more mortgages until they reached 1.3 million. Currently, this figure is reduced to more than half. The construction industry has also suffered the consequences. It is logical that the number of new-build flats is lower, up to 10 times less than before.
The situation is very different from what we experienced a few years ago and we are not on the path that would lead us to a new real estate bubble. At least the experts do not believe it will happen soon, but do not rule out that it could happen again in the future.
The number of homes continues to decrease in some cities despite the fact that demand outnumbers supply. The truth is that there is no predisposition to keep building new homes. In any case, this is not the only reason why the average price of property moves away from the excess that was experienced a few years ago. Families spend less in order to pay their debts. On the other hand, banks force the client to pay a deposit of 20 per cent for purchasing their home so not everyone can afford to do so.
The Bank of Spain also has its reasons. It seems that the number of foreigners who buy homes in Spain is increasing. In addition, the market varies significantly from large cities to small towns and the trend is different. Construction has slowed down, as opposed to the huge number of constructions in the past in which demand was not even taken into account. Also, there are no tax incentives unlike years ago.
The low property prices are not part of a circumstance that are typical of Spain but of the whole world. The magazine, such as The Economist, has published the current prices of the real estate market and it has been concluded that this is a trend likely to be followed by a multitude of cities around the world.