2013 Residential report for Spain: at rock bottom

The College of Registrars and the University of Saragosse regularly present statistics on the residential property market. The numbers of sales and their prices have continued to fall, representing 10% in a year. Relatively low prices and interest rates represent favourable indicators for the beginning of a reprise in the market, whilst purchasing power and access to loans constitute obstacles. It seems that rock bottom has been reached.

In the fourth quarter of 2012, 78,281 dwellings were sold, which represents 6% fewer than in the third quarter and a reduction of 10% in relation to 2011.  Whilst a more marked fall in sales is to be noted in the new build sector, new and old dwellings each represent half of the market. Andalusia, Valencia, Madrid and Catalonia registered the greatest number of transactions.

The fall in sales is slowing down and it is highly probable that the number of transactions will be maintained at around 300.000 per year for a certain length of time. This takes into account the strength of classic factors supporting demand in part, such as the reduction in prices, very low interest rates, and accessibility indicators. The economic situation of the country, marked by a very high rate of unemployment and limited access to credit, on the other hand, weigh on the property market and stifle recovery.

It should also be noted that the new fiscal measures announced for 2013 with an increase in VAT from 4 to 10% on new dwellings did not have any effect on sales in the second semester of 2012.

The restructuring of the financial system has had as a consequence that the banks have increased their share of the market for which there are mortgages, even if the level of borrowing is at its lowest for ten years. The average loan is 104.000€, which represents a fall of 9.7% in a year with important differences (Extramadura – 66.410€; Madrid – 158.900€). In the current economic context, 97% of bank clients opt for a variable rate, with an average rate of around 4%. As to the average duration of loans, it is 279 months (23 years and three months). The average monthly repayment was 571€, which represents on average 30% of household income.

It should be noted that the reduction in mortgage debt, at its lowest since 2004, is directly related to the fall in prices, to limited access to credit and its high cost.

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