Real Estate and Mortgages in Spain

The past year, according to real estate professionals, was a record breaker. In terms of house construction, property sales, mortgages processed and property price increases, the numbers haven’t been this healthy since before the crash in 2008. And the other good news is that it is predicted to continue through 2018 with areas such as Madrid, Barcelona and the Balearic Islands leading the charge.

After prices stabilised in 2013, we didn’t see much growth, however, 2018 will bring a welcome price increase. Some residential real estate agents are predicting price increases of between 10% and 15% in the major cities, with a higher lift in the most sort after neighbourhoods.

A leading analyst and one major bank predict a fall in unemployment numbers to below the 15% mark and this will undoubtedly have a positive effect on house prices and demand. However, we must remember that this is somewhat geographically dependent. Areas such as Andalusia or Melilla are still struggling with unemployment rates above 25%, while the Balearics are below 10%.

In general, the numbers in 2017 were impressive. On a national level the price per square foot increased by 2%, with Murcia leading the way with an increase of 9%, Andalusia rose 6%, Madrid 5% and Catalonia 8%. Bringing up the rear were areas such as Navarre, the Basque Country, the Balearics and Aragon all below a 1% increase. On a far more positive note, house sales increased 17% when compared to 2016 with a total of 491,005 registered transactions.

But, with new construction way below the necessary 150,000 new homes per year target, rent also increased by an average of 10% compared to 2016. As with all growing economies and countries, this is driven by the demand of young professionals who do not prioritise buying a property.

Interest Rates
Although the property market may be difficult to predict, one could argue that the current interest rate levels in the Eurozone are still pretty close to a historic low. The banks in Spain have already raised the mortgage interest rates slightly compared to 2016 and if the market keeps allowing it, they will continue that tendency. So, what does that mean?

In our view, it means that the rates available for the moment (January 2018) are still interestingly low from a historical perspective. So, regardless of where the property market is in its cycle (which no one really knows for sure), money is still fairly cheap which in effect decreases the risk of investing in property (note that I say “decreases” and not “removes”).

We at Spectrum International Mortgages still believe that the time is advantageous to purchase property and take on a mortgage.

Should you wish to discuss your options, please contact us any time. Or start by visiting our website where you will find relevant mortgage related information to get you started.