The most in-depth analysis to date of the Spanish residential market, covering housing supply, demand and price performance, as well as mortgage financing and the build-to-rent market, with a particular focus on Spain’s main markets, namely, Madrid, Barcelona, Valencia, Malaga and Seville.
- New-build construction remains strong and there are no signs of significant decreases in selling prices. Second-hand property prices, however, are down between 5% and 15%.
- Housing production will be affected by the tightening of financing conditions and financial system consolidation.
- In most cities, the share of disposable income devoted to mortgage and rent payments, for the average household, remains at reasonable levels, below 35%.
The residential sector is withstanding the crisis, says a report prepared by property consultants Colliers International, a global leader in real estate and asset management services. The report analyses the behaviour of the residential property market in 2020.
The economic crisis resulting from the pandemic has had a significant impact on the residential sector, which is holding up reasonably well, despite the severity of the crisis, with new-build and build-to-rent showing the best performance.
Demand: new-build and second-hand
Demand has contracted in 2020, especially in second-hand housing, and could fall by up to 25% overall in 2021 compared to 2019 if the economic environment fails to improve.
The number of homes purchased with a mortgage has increased. The fact that in the first half of 2020 there were 91 mortgage approvals for every 100 housing transactions, compared to 67 in 2019, can be read as a sign that family savings are reaching exhaustion. Fixed-rate mortgages have gained in popularity and have become home buyers’ first choice.
Production will be affected by the restrictions on the financing of new projects. In 2021 we could see a 30% drop in housing starts, compared to 2019, with production of around 70,000 homes, effectively taking us back three or four years to 2016 levels. Pre-sales requirements have also increased and will become an insuperable barrier for some developers.
Prices: new-build, second-hand and rental
The price of new-build housing remains strong and there is no evidence of significant declines. Second-hand prices, however, have slipped between 5% and 15%. The mortgage-to-income ratio for an average household is below 35% in all provincial capitals except Barcelona (39%) and San Sebastián (41%).
The gap in access to housing for younger people is widening. According to data from Colliers, a young couple must save for more than 10 years, on average, to buy their first home; and the figure is likely to increase as a result of the present crisis.
In the rental market, the average household spends less than one third of its income on rent in all provincial capitals except Barcelona (38%) and Madrid (36%).
Rental housing market
The rental housing market continues to expand, especially in Madrid and its metropolitan areas, which is where demand is highest. The build-to-rent business model has emerged as a big opportunity for the residential sector. Provincial capitals and large towns with good amenities are attractive markets for BTR.
Madrid is unquestionably the most dynamic market and Valencia has taken up position as an alternative to Barcelona, which is suffering the effects of local government intervention.
“From this in-depth analysis and a close reading of its main conclusions, it can be deduced that the residential sector is withstanding the impact of the crisis, above all in new-build. The decline in demand and selling prices affects mainly existing housing, especially in the areas hardest hit by the tourism shock” - says Jorge Laguna, the report’s leader and Head of Business Intelligence at Colliers.
“We offer the market a structured analysis of vast amounts of information on the residential sector, together with the opinion of our experts on near-term trends. Our primary objective in drawing up this report, besides setting a standard for analysis of the residential sector, is to offer a tool that will be as useful as possible to developers, investors and lenders, providing objectivity at a time of crisis” - concludes Mikel Echavarren, CEO of Colliers International.
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About Colliers International Spain
In Spain, Colliers International stands for focus and expertise in the real estate and hotel sectors. It provides advice in Corporate Finance, Capital Markets, Hotels, Residential Sales Advisory, Valuation & Consulting and REMS & Technical Services, offering the proximity of a local firm with the capabilities of a global leader, through a network covering 68 countries.
Our clients are national and international investment funds, REITs, financial institutions, large corporations, hotel operators and real estate development and investment companies that value our knowledge, experience, rigour and commitment.
About Colliers International
Colliers International Group Inc. (NASDAQ: CIGI) (TSX: CIGI) is a leading real estate advisory and investment services company. It operates in 68 countries with more than 15,000 expert advisors, who work collaboratively to maximise the value of property for real estate occupiers, owners and investors.
For more than 25 years, our experienced leadership team, owning approximately 40% of our equity, has delivered compound annual investment returns of almost 20% for shareholders. In 2019, Colliers International Group Inc posted revenue of $3.3 billion ($3.5 billion including affiliates), with more than $33 billion of assets under management.