The European Commission’s latest economic forecasts, published in early November, confirm a widespread slowdown in Europe, a fact that has reduced Spain’s growth forecast by 4 points since the last review July. We went from the 2.3% forecast just four months ago to 1.9%, and the same reduction applies to 2020, which would be 1.5%.
Despite this review, the European Commission has highlighted three positive aspects to take into account in this situation. The first is that despite the downward revision, Spain continues to grow above the euro area average. On the other hand, the absence of government pacts to date has not reduced growth, and finally that its economic structure is better prepared than in previous eras.
At Villas Internacional we wanted to look at that last point as far as the housing market is concerned, and to reflect on whether a real estate bubble similar to the one that erupted during the last economic crisis would be possible in these circumstances.
During the last years of recovery and economic growth we have heard critical voices with the construction sector, which draw attention to repeated mistakes that were made before 2008, an assertion that is further supported by a large majority population according to reports from some real estate portals. However, if you look at the data and the opinion of the experts, everything seems to indicate that there are big differences from what happened almost 15 years ago. Despite price growth, sales volume, mortgage granting, urbanization, levels are far from the years that led to the bubble.
The price of housing in the Valencian Community is today at 1,389 euros per square meter, far from the 1,811 euros encrypted in 2006. In the Valencian Community the volume of purchase was set in 2018 at almost half that during 2006 (78,775 homes compared to 143,000 of that year)
Other aspects to consider are in the current scenario are:
1- Reasonable construction
There is now greater control in the way it is urbanized, linked to more restricted financing and based on population growth. This coming year, 11,228 homes will begin to be built in the Valencian Community compared to the almost 100,000 homes that were carried out in 2006.
2- Prices contained
Banks now limit mortgage issuance more than they did then. This more prudent action prevents an uncontrolled escalation of prices.
3- More mature buyers
Access to mortgages and credits has been hampered by amendments to the Mortgage Law, which has restricted access to profiles of young buyers. Currently the average age is above 40 years, with higher income levels. The depreciation period has also been reduced.
4- Rent becomes fashionable
Although most families live at home, 17% live in rental housing, when that percentage before 2008 was less than 14%. This is due to the current need to have at least 30% – 32% of the house price saved, whereas they used to finance 100%.
5- Fixed rate mortgages and Euribor near level 0
According to BBVA, almost 37% of mortgages are signed at a fixed rate, while by 2008 variable interest mortgages were the usual ones. On the other hand, the Euribor is in November at -0.33%, a particularly low level compared to the 5% at which it reached 2008, and it seems to indicate that rates will remain so in the long term.
Based on these 5 points, we can establish that we are in a scenario of gradual growth, carried out in a healthy way, which puts us far from the mistakes that were made in the pre-real estate bubble and the subsequent economic crisis.
At Villas Internacionales we are experts in the sector and we advise you to make the most appropriate decisions. Thanks to our Guided Tours, an exclusive service of Villas Internacional, we accompany you to visit the house, villa, luxury villa, apartment, luxury apartment, bungalow, plot or cottages that could become your next dream property on the Costa Blanca, helping you throughout the procurement management process.