Bankinter expects an increase of at least 1.5% in property sales in Spain during 2015. This they attribute to a pent-up of demand from small and medium savers who have been waiting since 2006 to acquire a property, combined with the improving economic conditions and renewed access to mortgages, albeit still under stricter conditions than in previous years.
The Bank estimates that even today, the stock of unsold homes in Spain is still around 600,000 properties, of which at least 100,000 will probably never find a buyer due to having been built in excess to demand. Many new estates were built in the middle of nowhere, the result of constructive madness at the beginning of the last decade, where both companies and individuals, banks and financial groups joined the bandwagon of speculative construction acquiring land in areas totally lacking in infrastructure or population to justify such an investment, with the end result that today there are ghosts towns and developments across Spain housing only 3 or 4 families in the middle of a wilderness.
However, Bankinter believes that this stock has steadily declined on consecutive bases during the last five years, and should not prejudice the revival of the construction sector, undoubtedly the main victim in recent years due precisely to the existence of excessive stock.
Real estate activity is not expected to improve significantly, due mainly to the high levels of unemployment, a declining population in Spain caused by hundreds of thousands of immigrants returning home, plus an exit of the labour force seeking employment opportunities abroad. The Bank, however, still expects a rise in property prices of 1.5% in 2015 and 5% for 2016.
Given the current low rates of interest on deposits, close to 0%, Bankinter considers the housing market to be an attractive option especially if targeted towards the rental sector, in prime locations and coastal regions, which can produce anything between 3% – 5% ROI.
Robert Edwards – LPG SPAIN Blog.
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