A recent report by international Real Estate consultants CBRE highlights that the recovery in the Spanish residential Real Estate Market will continue in 2016 and that the market is moving into a new “cycle of growth”. The report predicts that transaction levels will rise by 20% and the price of new build property by over 5% (average across Spain)

These projections compare with actual transaction growth figures of 25% and 27% in 2014 and 2015 and new property price increases of 2.75% last year. It is logical that the pace of growth in transaction levels had to start to fall, as the growth in previous years came off a very low base, while the rise in prices is based on two principal factors – rising demand and a tight Supply side. With this in mind the projections for this year are of price rises in excess of 5%.

On the issue of supply it is possible that a bottle neck is going to be reached soon with demand far out doing supply especially in Mallorca. Here on the Island supply of unsold new properties stood at over 15,000 units at the height of the crisis but now stands at only 2,000, most of which are of very poor quality and in the wrong locations, so largely unsalable ie the supply side for new stock could be argued to be at almost zero levels with the few new build projects coming to the market being snapped up very quickly.

On the mainland construction of new build properties stood at only 45,000 units in 2015 and are projected to rise to circa 60,000 y 65,000 this year. This falls well short of the estimated demand for the country of between 150,000 y 175,000 units per annum and streets away from the nearly 800,000€ that were being built in the boom!.

At the end of 2015  the “stock” of empty new build units on the mainland stood at 400,000 units and this is expected to fall to around 300,000 and 325,000 in 2016

Comfortingly the director of Corporate Finance (Spain), in the Capital Markets division of  CBRE, Heriberto Teruel, believes that the excesses of the boom years fuelled by population growth, almost unlimited mortgage finance and a generally more cautious approach to investment should lead to a much more rational and sustainable market cycle this time around.

Teruel believes that 2016 will be an “interesting” year with prices having hit bottom almost throughout the country and positive growth is now anticipated in many markets but particularly Madrid, Barcelona, Malaga and Mallorca.

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