Spanish property sees light at end of tunnel
La Pedrera (Casa Milà), Barcelona Photo: Riccardo Romano
More countries recorded a rise in house prices in the year to June than at any point since the start of the global financial crisis, according to Knight Frank's Global House Price Index, but Europe’s mainstream housing market is still lagging behind.
Dubai topped annual growth for the fifth quarter in a row, with prices soaring 24 per cent (albeit slower than the 27.7 per cent recorded in the year to March 2014). Ireland's property prices climbed from 54th position in Q3 2012 to third place, with growth of 12.5 per cent in Q2 2014.
Indeed, Ireland's property market was highlighted at the start of the year by PwC as a strong opportunity for investment, alongside another troubled European market: Spain.
Spain has seen its property prices fall 4 per cent year-on-year in Q1 2014, according to Knight Frank, behind the UK (12 per cent to Q2 2014) but ahead of Italy (5 per cent to Q1 2014).
The figures are backed up by statistics from the Spanish Ministry of Development that show house prices fell 2.9 per cent in the second quarter of 2014. This decline, though, is the smallest recorded fall since 2008. The Association of Registrars, meanwhile, recently reported that Spanish property prices edged up 0.97 per cent in the three months to June 2014, the first time that prices have risen in six years.
While the figures contradict, TINSA numbers show that prices dipped 3.03 per cent year-on-year in the second quarter of 2014, the lowest annual decrease recorded since the same period in 2008. Combined, the overall impression is of a housing market that is beginning to bottom out.
This is the conclusion reached by Fitch Ratings, which has just published a report saying that price declines in the Spanish residential property market are coming to an end after nearly seven years, although the recovery will not be fast.
"The return of mortgage credit is driving the stabilisation, but high unemployment and a large property overhang will prevent a rapid rebound in prices," says the agency.
Fitch's latest Spanish repossession analysis suggests that property value depreciation on repossessed and sold houses has peaked at 70 per cent relative to their initial valuations, and that the price range at which mortgage servicers are selling repossessed properties has also narrowed considerably. These findings, Fitch says, "are reflective of a new market consensus helped by improved price transparency and drastic economic adjustments that have affected both supply and demand".
Indeed, the year has been a positive one for Spain's economy, which officially exited recession at the end of 2013. Unemployment remains an obstacle to recovery, but Deloitte says that other improving conditions have significantly boosted the affordability of homes in the country. In terms of their relation to household income, a typical Spanish property now costs 4.4 times the average Spanish salary. This is far more affordable than countries such as France (7.9) and the UK (8.5), and significantly ahead of the EU average of 6.1.
The analysts note 20 Spanish provinces as being "on the threshold" of recovery, translates Spanish Property Insight, up from eight one year ago.
With the glut of unsold homes also declining in 46 out of 50 provinces, Spain's property prices may be far from leading European growth, but the light is visible at the end of the tunnel.