Fear of a New Housing Bubble?

New housing bubble

The Spanish real estate sector is, in certain areas, on the road to recovery at a good pace. However, should we fear a new housing bubble? Some weeks ago, we stated that housing transactions in Spain would increase until 2020We also said that the number of British buyers in Spain would drop due to the Brexit deal. Nevertheless, according to Standard & Poor´s there is no cause for alarm because it will not be a pronounced decrease. For some time, there has been some concern that a housing bubble can burst as was the case in 2007 which led to times of convulsion in the Spanish real estate sector. After some difficult years, everything seems to have been redirected in the real estate sector as flats have started to be sold to the point of nearly reaching in some areas the 2007 pricesBut is there cause for alarm? Can Spain undergo another real estate bubble?

new housing bubble

FACTS AND FIGURES WHICH ARE NOT GROUNDS FOR ALARMISM

According to most analysts, there are no causes for alarm as Spanish real estate is undergoing a gradual recovery which remains within normal limits. Generally speaking, as indicated by analysts, the evolution of housing purchase prices are on an upward path and have the logical sequence in the current economic situation in Spain. It is estimated that there will be moderation in price increase during the next years, from 7,7% to 4,4%. The Association of Land Registrars showed that during the second term of 2017, there was a price increase in housing of 4,4% in relation to the previous year. Although this is an important increase, it is not out of proportion and it does not mean that prices may become exorbitant. Before the real estate bubble burst, the housing price increase reached 40% which is really outrageous when compared with the current figures. Unquestionably, if we compare facts and figures with those in the past, we can state that moderation prevails nowadays. Spanish banks have taken a firm stand, which is a very significant factor. We must not forget that before the real estate bubble burst, Spanish banks granted loans with the greatest facility. This situation became decisive regarding real estate bankruptcy. This does not happen at present because banks have strict policies and they analyse twice the economic situation of each person before granting a loan.

new housing bubble

THE FIRST HOME HEADS THE MARKET

The first home is still the primary driver of the Spanish real estate system. It is estimated that the first home market has increased 20% in the first term of 2017. On the other hand, non-residential property such as commercial properties, have also had an important growth. In this regard, real estate operations increased 24% in the first term of 2017 and business premises increased 10%. If everything develops as analysts have predicted, then there is no cause for concern regarding a new real estate bubble scenario. Nevertheless, we must be very careful and keep a constant eye on market developments in order to react in time in case the first worrying symptoms appear. However, this is not the case at present.

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