Property sector growth levels off in the Spanish Costas
After several years of good post-crisis recovery, followed by strong growth in its own right, the property market in coastal areas such as the Costa del Sol and the Costa Blanca appears to be levelling off.
The latest property transaction figures appear to confirm what some have been saying for over a year, namely that enquiries and sales began to level off from the summer of 2018 onwards. The figures released by the INE, National Institute of Statistics, still show a year on year growth of one percent across the whole, national market, but take away the slow but continued growth within the domestic market and it becomes clear that the important foreign buyer market in coastal areas is beginning to contract a little: according to some by around 5%.
For many, this is a clear indication that we are entering the mature stage of the current growth cycle, and as it was a moderately buoyant one, any potential slow-down period is also expected to be mild. The cooling off of demand may have a variety of causes, ranging from higher prices, a possible lack of diversity in the housing stock offered, the resurgence of competing markets in other countries, and possibly just that demand in its own right is beginning to ease a little.
However, the news isn’t all bleak, as the Balearic Islands – which had been declining for some time – have just witnessed a resurgence in interest, followed by a revival also of Catalan markets such as Barcelona, Tarragona and Girona. This shows that a drop in sales after a consistent period of growth is not necessarily indicative of a long-term trend, and can indeed be reversed. Quite possibly the long-awaited market correction is still some way off. In contrast to most other types of assets, however, property is a tangible good whose long-term value is always secured—something we have seen throughout the up and down cycles.
Moreover, taken in the context of a decade of world inflation in asset prices, particularly real estate, driven by macroeconomic policy and years of cheap money, the ascension of Spanish property prices has been relatively mild in comparison to other countries. To use a buzz word, one could argue the Spanish property market for once is looking ¨sustainable¨.
As a recent article in the FT concerning global real estate markets in 2019 pointed out ¨Real estate markets around the world now look very different from those before the crisis. Debt levels are lower, mortgage regulation tighter and speculative building more modest.¨
And with interest rates set to drop once more in most western economies, real estate will remain one of the few assets institutional and private investors feel confident enough in which to allocate their funds.
By Adam Neale | Property News | August 29th, 2019