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Spanish price rises will continue says report

2nd September 2005 | back to article listings BACK    print this article PRINT

Property prices in much of Spain's coastal holiday areas will continue to rise for at least the next three years, says a Technical Institute of Construction (AIDICO), survey of developers in the Valencia region, sustained by the continuing demand for jet to let and overseas investment property.

The continuing investment demand is underpinned by low interest rates and robust overall economic growth, say developers, though they agreed that the recent Spanish property inflation rates of 16 per cent annually are unsustainable.

A report in Spanish newspaper El Mundo seemed to confirm the developers optimism, saying that Spain's investment property developers have carried through their bumper 2004 sales figures into the first half of 2005, defying some commentators gloomy predictions.

A further report by investment consultancy DBK has revealed the scale of the 2004 successes, with a record 181,000 coastal properties sold through the course of the year – 13.1 per cent up on 2003 and almost 25 per cent of the total number of properties sold in Spain.

Andalusia was the most popular region with 55,500 domestic and investment property
sales over the year, or 31 per cent of the total, followed by Valencia on 47,500 sales and Catalonia on 31,000. Murcia showed the highest percentage growth of investment property.

The report forecasts a slight drop in sales of properties in the coastal municipalities of Andalusia, the Autonomous Region of Valencia, Catalonia, the Balearics, the Canaries and Murcia, to between 170,000 - 175,000 units in 2005.

DBK has also taken a more measured look at the ongoing pricing prospects in the region, warning that while it believes that the increases will continue, buy to let pricing may be affected in some areas by localised pockets of over development.

This view was supported by the Foundation of Savings Banks (FUNCAS), which has said that numbers of empty property have risen by 25 per cent over the past decade, reaching more than three million empty properties. Spanish holiday homes increased 15 per cent over the period.

The report finds that 41 per cent of empty properties are concentrated in Spain's cities and environs, mainly in Barcelona and Madrid, whilst 54 per cent of second homes are located in smaller municipalities and the tourist coasts.

Although the empty properties are not directly tied to new property investment as the properties are on average 38.7 years old and almost a fifth are in a bad or uninhabitable condition, the bank said that the excess capacity could nonetheless contribute to any deflationary trend in Spanish house prices.

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