In the last decade, the housing market in Spain has changed completely. Between 2009 and 2018, the number of sales increased, as did rental prices. However, the price of real estate and the family debt to buy a house in Spain has clearly fallen, as has the 12-month Euribor and the number of mortgages granted. Planning permission for new buildings are once again approaching the levels they were at 10 years ago, while the ratio of wages to the amount required to acquire a property is fighting not to return to previous levels.
To join in with the #10yearchallenge viral movement, we’re assessing the development of the real estate sector in Spain over the last ten years:
1. The price of housing has fallen by almost 20%
Average house prices in Spain continue to recover and are already around 1,590 euro per square metre (148 euro per square foot), according to data from the Ministry of Development. This is the highest level since spring 2012, although it is still far from the levels of the peak of the property bubble, but it is also below 2009. At that time, the price of unsubsidised housing was around 1,960 euro/m2 (182 euro/sq ft), so the drop since is 19%.
2. The number of sales has grown by 16%
The purchase and sale of homes is at its highest point in a decade. After the peak of the bubble, 2009 was the first year in which the real estate sector began to stagger, 'losing' some 140,000 transactions in just one year. The figures worsened until they hit rock bottom in 2013, when just over 312,000 transactions were carried out. From 2014 onwards, the numbers began to increase until reaching 480,000 sales between January and November 2018. Although we are still awaiting confirmation from the National Institute of Statistics (Instituto Nacional de Estadistica or INE) about the end of the year transactions, sales are already at their highest level in 10 years.
In addition to the improvement in the number of transactions (currently 16% more houses are bought than in 2009), another notable change is that the majority of transactions are in the used housing market, which accounts for more than 80% of the market, whereas a decade ago it was new constructions that led the way. At the moment, pending figures from December, 2018 has been the best year for sales of second-hand properties since 2007.
3. Banks and financial institutions only grant half the mortgages
The mortgage market is has grown along with the real estate sector: the number of mortgages signed is growing steadily and is already at its highest level since 2011, according to the INE. Taking into account that between January and November 2018 just over 324,000 loans were granted, the improvement since 2013 is 62%. However, this is half the amount of loans that were granted for the purchase of a home a decade ago. The main changes are that fixed-rate mortgages have become more popular (being close to 40% of new loans for over a year now) and the imminent arrival of a mortgage law that aims to give more transparency and security to both banks and customers.
4. The 12-month Euribor in negative
The Euribor breaks the upward trend that we have seen previously, and it is about to complete its third consecutive year in negative territory. Despite the fact that last spring the benchmark indicator for most mortgages in Spain started an upward trend (experts expect it to enter into positive in the coming months), in 2009 it was over 2.6%. The good news is that the sharp decline in the indicator brought with it a massive drop in the mortgage payments of thousands of households, thus improving their disposable income to cover other expenses.
5. House price to income ratio has varied
The reduction in the price of housing has brought with it one of the most worrying changes for Spanish households in 10 years: the years’ worth of salary they must spend to pay for a house. According to data from the Bank of Spain, in 2009, after the peak of the bubble, it took more than 8 years of salary to buy a house, while currently the figure is 7.3 years. However, as a result of house prices rising faster than salaries, this variable has seen almost two years of increases and moves away from the lows of 6.3 years that we saw in 2013.
6. Families have reduced their debt by 130 billion
Another piece of data that helps to understand the change that the sector has undergone is the strong process of debt relief for families during the recession, which lengthened during the first years of recovery. According to the Bank of Spain, households currently have more than 5.2 billion euro of debt tied up in housing, compared with more than 6.78 billion in 2009. In these past 10 years, the figure has fallen by 23%.
7. Rent is more expensive than in 2009
Rental prices are stabilising in the larger markets, after reaching highs in Madrid and Barcelona in the last two years. Although there is a certain slowing down of rent increases, it still costs more to let than a decade ago. In 2009, average rental prices were around 13 euro/m2 (1.20 euro/sq ft) and now they exceed 16 euro/m2 (1.49 euro/sq ft). In the case of Valencia, Spain’s third-largest city, prices have gone from 7.3 euro/m2 (0.68 euro/sq ft) to around 9 euro/m2 (0.84 euro/sq ft).
8. Planning permission to build houses has come full circle
During the last five years, residential construction has picked up pace. Building permits for new constructions could end the year at around 100,000 units, which is still miles away from what they were at boom levels but fairly close to the levels recorded in 2009. Back then, according to the Ministry of Development, just over 110,000 permits were granted, almost four times more than in the 'annus horribilis' of the economic crisis (in 2013 fewer than 35,000 permits were granted).
9. The price of land is 57% lower
When we talk about the real estate sector in Spain, we cannot forget about the most important factor: land. Although the price per m2 of built land located in towns with more than 50,000 inhabitants has risen in the last five years by around 50 euro, which is 4.65 euro per sq ft, it is still far from the levels of 2009. A decade ago, the price was around 650 euro/m2 (60 euro/sq ft). The current price is actually closer to the lowest point of the crisis (220.80 euro/m2, or 20.50 euro/sq ft, in the first quarter of 2014) than it is to boom levels.