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BBVA data points to a continued recovery

According to the latest Real Estate Flash Report from BBVA, despite a slow-down in house sales in March, the results from the first quarter of the year remain positive.

Year-on-year, the first quarter closed with a 2.4% increase in property prices, a factor which the BBVA highlight as a confirmation of the recovery of the Spanish real-estate market. Furthermore, house sales increased by 8.5% during the first quarter, when compared to the same period in the previous year.

March saw 38,358 homes sold which represents a monthly decline of 11.2%, but it remains positive on the annual basis showing a 4.9% increase over March 2015, thanks in part to great numbers in January.

The BBVA report suggests a number of factors play a part in the recovery including a drop in unemployment during April, banks beginning to lend, and the granting of new-build licences. A resurgence of buyer conference is also a leading factor, according to BBVA.

Mortgage Lending

Following a moderate march, new mortgage approvals experienced a strong surge in April. According to the Bank of Spain, there was a 100.3% increase in new credit for house purchases in April, the largest increase in the last eight months.

However, to put those figures into perspective, of the total mortgage lending in April (5,173 million euros) 43.6% of it was for renegotiation on existing loans. This is a much larger proportion than in any other month of the previous 15, during which time the average amount attributed to renegotiation was 24%.

This corresponds to an increase in fixed-rate loans which accounted for 46.2% of loans in April, compared to 9.4% over the last 15 months. The report suggests that much of the market has, therefore, merely changed over from variable-rate loans to fixed-rate loans. Regardless of those changes, new credit for house purchases increased 44.8% year-on-year, the highest annual increase of the previous four months.

As with property sales, the number of new mortgages contracted in March with a fall of 6.9%, when compared to the previous month. However, the first quarter ended with a 5.3% increase when compared to the previous quarter (Q4 2015).

House Prices

House prices continued to recover in the first quarter of 2016. According to the Ministry of Public Works, the average price of housing in Q1 was 1,492.4 €/m², representing growth of 0.6% for the quarter. However, on the annual rate the quarter actually showed an increase of 2.4%, in line with expectations. After taking inflation into account, the annual rate of growth in prices in real terms was 3%.

The evolution of house prices remains very different geographically. Positive growth was observed in seven regions (Extremadura, Baleares, Madrid, Catalonia, Galicia, the Canary Islands and Cantabria), with Extremadura and the Balearic Islands both seeing growth over 1.5%. On the other end of the scale La Rioja and Navarra both saw declines of more than 2%.

New Build

Licences for new builds saw “high dynamism” in March, the report says. According to the Ministry of Development, March saw 6,176 licences issued, representing a monthly increase of 9.4%. In the first quarter though, the increase was much larger with 24.2% more issued, the largest quarterly increase for the previous four quarters. This also represents a year-on-year increase of 57.1%, more than double the number of licenses issued in the same period of 2015.

Other variables connected to the construction sector showed more mixed signals. Employment in the sector increased again but at a more moderate rate than in recent months. The report further suggests that confidence among the business sector rebounded in April after dropping slightly in March, leading to a recovery of both the labor market and the order books. Saying that, consumption of cement fell in April, for the second consecutive month, but the report suggests that this corresponds to a reduction in public works during the early stages of the year and is not a reflection of the state of the construction sector.