ECONOMISTS at the EU and IMF have warned that housing bubbles may be forming in Australia, Sweden, the UK and the Netherlands. Yet Spain is enjoying growth rates not seen in a decade and far outstrips the UK in the speed of the market’s resurgence. So why are there no fears of a Spanish bubble developing?
In 2006 the Spanish property platform Idealista was roundly mocked for warning that the market was about to collapse. Needless to say they were correct. In 2017 Idealista are bullish about the future prospects for Spanish real estate. Head of research Fernando Encinar laughs at the prospect of a bubble in a country of 45 million people where just 100,000 homes are built each year and access to mortgage credit is now strictly regulated.
A key symptom of a housing bubble is the expansion of credit to people who simply can’t afford it, combined with the overvaluation of homes. In 2008 for instance almost one million mortgage contracts were signed, an obviously absurd figure in hindsight. In 2016 the figure was just above 280,000, a far healthier and more sustainable number.
Express financing and easy loans are on the backburner as the banks come to grips with a new regulated reality, consumer protection laws and the prospect of huge payouts over unfair mortgage clauses in the past. Today any talk of bubble is limited to the most desirable neighbourhoods of Madrid and Barcelona, which see highly paid professionals fighting over jazzy locations with top private schools.
Research from BBVA indicates that real estate growth will continue its smooth growth in 2016. Sales will increase by around seven per cent and level out at about 600,000 in the short term. Prices will rise between three and four per cent per annum until 2020.