Eight years after Spain’s property market crashed, house sales continue to increase, with a three-year high registered in June as some 36,856 homes changed hands, up 19.5% from the same month in June 2015.
Building on the growth seen in April and May, sales for the first half of 2016 were the best since 2010.
Residential construction is partly driven by foreign investment, which is pouring into developments in Madrid and Barcelona; a jump in building permits points to more growth to come. Construction and real estate accounted for more than a third of the nearly €22 billion ($24 billion) of foreign investment in Spain in 2015, Economy Ministry data shows.
But half a million newly-built homes remain empty, largely on urban fringes and in remoter areas where people don’t want to live.
However, as the figures from the National Statistics Institute (INE) show, demand for properties ranging from luxury apartments to homes for the middle classes is rebounding in leading cities and industrially strong regions such as the Basque Country, showing how Spain’s economic recovery is on course despite political paralysis after two inconclusive general elections.
Sectoral analyses show that this year will see an overall revival of the residential housing sector, with second-hand property leading the way. Bankinter published a report earlier this week forecasting demand for 440,000 homes this year, which would be a 10% increase on last year. Prices are expected to rise by between 3% and 5%, says the bank. Bankinter says that sales for this year are expected to increase by around 6% with sales of around 480,000.
With interest rates set to remain low, there is little to be gained from savings accounts, making bricks and mortar an increasingly attractive proposition, especially as banks are keen to lend to home buyers.
Spain still has no new government, more than seven months and two elections after acting Prime Minister Mariano Rajoy lost his parliamentary majority.
But this doesn’t seem to be discouraging property investors. Madrid ranked fourth in a 2016 league of European cities compiled by consultants PWC and based on a survey of investors’ and developers’ views on which property markets offer the best prospects.
Investments vary widely – from buying blocks of rental apartments to packets of mortgage debt and banks’ property management units.
Private equity funds have become the country’s new property developers, looking to make profit on residential building given Spain‘s fourth year of economic recovery and a lack of suitable property in areas that are in demand.