Outlook for the residential property market in 2016

The property market was one of the first to feel the effects of the financial crisis in Spain in 2007. After several difficult years, since 2013 property has been the sector that has begun to show signs of an upturn, which form the basis for a positive outlook this year.

The entry of foreign investors and the improvement in the employment market are two crucial factors which have caused the increase in prices and the number of transactions in the property market in general and in housing in particular. We will now examine some of the main trends in the property market that began in previous years and are expected to continue in 2016.

Sale of second-hand homes

In 2015, according to data published by the National Institute of Statistics (INE), 354,132 homes were sold in Spain (a 9.8% increase over 2014) of which 77,865 were new and 276,267 were second-hand properties.

In January 2016 a total of 32,417 homes were sold in Spain, of which 6,334 were new and 26,083 second-hand properties. These figures highlight how the market for new properties is growing very slowly, but the second-hand market is growing increasingly fast.

Price increase

Alongside the increase in sales, prices have increased, rising by an average of 4.2%. The regions that have experienced the greatest increase in prices are Madrid, the Balearic Islands and Catalonia. The figures are positive and indicate good prospects for 2016, when the market and the price increase are expected to be consolidated.

Entry of capital into the property market

According to data published by PwC, there will continue to be a strong influx of capital into the property market as a result of the continued low interest rates offered by the banks and as property continues to be more attractive as an investment compared to fixed income options.

Madrid is one of the most attractive capitals for investors

According to figures published by PwC, Madrid lies in fourth position among the most attractive capitals in which to invest in Europe, only preceded by Berlin, Hamburgo and Dublin. Barcelona is in 12th position in the ranking.

Young buyers

Young people have been those most affected by the financial crisis, as the property market and employment situation has hugely hampered their access to housing, but they are still interested in buying a home. However, Spanish youngsters under the age of 35 choose to live in a rented flat.

From the age of 35 to 55 the trend changes and a larger number of people want to buy a home. According to an Arrentum study published last year, 70% of Spaniards would prefer to live in their own home. However, after the age of 55, those living in rented accommodation wish to continue to do so.

Foreigners will continue to buy second homes

Foreigners have bought holiday homes throughout the period of financial crisis in Spain and continue to do so today. 65% of the second homes sold in Spain are bought by a foreigner. Whereas for main residences, 95% are bought by Spaniards.

Access to finance

The banks are making more funding available and interest rates remain low, so that both investors as well as those buying their own homes are gaining confidence in the market and are buying.

It is expected that the signs of recovery that have become noticeable over the last year, such as the upward trend in prices, increase in sales and in investment, and improved access to finance, will continue to be consolidated during 2016.

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Real estate in Spain
The residential property market in 2016