What was the Spanish Property Bubble and Could there be another in the near future?
The Spanish Property Bubble is a phrase which described a period when property has been overvaluing for an extended period until it reaches a stage where it is a delicate balance not to “pop” the bubble and see prices crash due to the unrealistic valuations.
The Spanish Property Bubble refers to various stages in Spain’s property history where this phenomenon occurred. Following the bursting of the “bubble” prices crashed and the market became difficult for home owners to recover the amounts they had invested.
Property prices increased over a long period of time from 1985 to 1991, when prices almost tripled; 1992 to 1996 when prices stayed the same, but at a high level and 1996 to 2008 when prices rose exponentially. The Spanish Property Bubble of 2008 is probably the one you have heard of. Following 2008 prices crashed and many changes occurred in the property market. For example it is estimated that the value of residential properties in Spain dropped more than 30% following the crash of 2008. It is estimated that Catalonia (where Barcelona is located) was one of the hardest-hit regions with a 42.2% sales plunge following the property crisis of 2008.
When the Bubble Bursts…
When the Bubble Bursts...
The rollercoaster of emotions which govern the aftermath of a “burst bubble” involve many stages. After reaching an all time high prices begin to drop and owners go into denial, claiming that it is a small dip in the market and it will blow over. Then they appear to be proved right and prices return to “normal” for a brief time. This is followed by a period where prices drop drastically and homeowners are sent into panic mode either hanging on to their property for dear life or selling off property as fast as they can for ridiculously low prices – just to escape the ups and downs of the market. Eventually the owners capitulate and sell, sinking into despair and gradually prices return to a realistic level.
Could there be another Spanish Property Bubble in 2016?
With reports showing that Spain’s property market is on-the -mend, prices rising, new-builds starting, new developments and friendly mortgage terms – some are asking: could this be the beginning of a new Spanish Property Bubble? The short answer is no, at least not in the near future. Many Spaniards and foreign investors can still feel the sting of the 2008 property crisis and are even still paying off debts incurred from the burst bubble.
Why will 2016 see no bubble?
· The property market has changed; it is not the same as the circumstances surrounding the market in 2008.
· Instead of overvaluing and over pricing the Spanish market seems to simply be returning to realistic and fair priced values.
· The Spanish property market is crawling out of a rather long period of depressed activity; the real estate sector has learnt the hard way and investors and home owners are not likely to return so quickly to the outrageous overvaluation of pre-2008. Experience has bred caution.
· Spain still has a long way to go before prices reach the levels of pre-2008.
· The prices are rising very gradually.
· Banks are demanding high deposits and creditworthy clients which guards against the credit-fueled housing bubble created in the past. Lenders are now more caution.
· House prices may have fallen but so have salaries so the Spaniard’s buying-power is not as strong as it was prior to 2008.
· Hopefully the property market will recover at the same rate as the recovering Spanish economy.
· Prices are still far from the levels they reached during the bubble at approximately 33% below the peak.
Investors can safely invest in Barcelona property with no fear that they will be swallowed up by a new Spanish Property Bubble. If another bubble does lie is Spain’s future it is in the distant future and not 2016.
As the end of 2015 approaches there will soon be a large number of annual statistics published about the Barcelona property market. Summaries about the previous year and predictions for the coming year. It appears that most of the predictions for 2016 Barcelona property market will be positive. The seven year slump which the Spanish market has been through seems to be coming to an end. Perhaps like the Biblical tale we will now see seven rich and prosperous year.
Positive Signs for the Barcelona Property Market
Valuation company Tinsa has already issued figures indicating that the market is healthy with the average price of a square meter in Spain valued at 1,341€. This is 1.9% higher than the same statistic issued 12 months ago. The same improvement has been seen across the board throughout Spain in general and to a more or lesser extent. Although it is too early to call these figures a “trend” it does appear to be good news for property owners and potential buyer.
Other encouraging signs in the Barcelona property market include fewer mortgage foreclosures; the increased interest of Chinese and other foreign investors; lower unemployment figures; stricter rental laws; stabilization in the supply and demand; an increase in Spanish house prices and an increase in new build building permits.
