BBVA forecast 5 per cent rise in Spanish property prices this year

Analysts are confident that no repeat of the boom-and-bust cycle is likely

In their latest report on the state of the residential property market in Spain the analysts at the BBVA bank forecast that on average prices will rise this year by around 5 per cent, double the figure for 2017, but at the same time express the opinion that there is no danger of a bubble being formed and then bursting, as happened a decade ago.

They also estimate that the number of property sales this year will reach around 570,000, representing an increase of 7 per cent, and that this is coming close to what might be considered a normal and sustainable level after plummeting to 300,000 in 2013.

The sustainability of current growth and appreciation is an overriding concern in the Spanish property market after the roller-coaster ride of the last 15 years, and another reassuring factor is that the BBVA report also predicts an increase in the number of new homes for which building licences are granted of 15 per cent, taking the figure for 2018 to 93,000. Again, this growth rate is lower than in 2017, representing an increase in absolute terms of 12,000 as opposed to almost 17,000, but it is still a healthy sign that demand for housing will continue to result in activity in the construction sector and prices being maintained.

Explaining the reasons for not suspecting that another market bubble is not being formed, the team point to the fact that these building licence figures are still only around 10 per cent of those which were reached at the height of the construction frenzy between 2004 and 2008, and that last year the number of housing units on which construction was completed rose for the first time in nine years. On other words, the excess supply and resulting market imbalance which were created a decade ago are not being repeated, at least at present.

The BBVA also comment on the relative fragility of the market, as was demonstrated by the effect of the political crisis in Catalunya on the regional market last year: sales fell by 5.4 per cent, the bank reports, while building licences were down by 8.6 per cent, and it appears that a knock-on effect was also noted in the neighbouring regions of Aragón, La Rioja and the Balearics.

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