The price of rented accommodation in Spain rises

Renting a flat went up by 4.3% in May

The average price of renting a house or flat went up by 4.3% over the last year, three points less than the official rate of inflation which is now situated at 4.6%, according to statistics provided by the Spanish National Institute of Statistics (INE) for the month of May.

Over the course of the year rental prices have risen by 2.3% - with respect to April the increase was just 0.3%. By regions the highest price rises were in Cantabria where rental prices rose by a massive 6.5%, followed by Navarra where prices rose by a more moderate 2%.

As well as in Cantabria rental prices rose above the national average in Aragón (6.1%), Madrid (5.2%), Castilla-La Mancha (4.5%), the Balearic Islands and Murcia, with increases of 4.4% and 4.3% respectively. Prices rose below the national average in Cataluña (4.2%) followed closely by the Basque Country, Andalucia, the Canary Islands and the Comunidad Valenciana, all of which saw price rises of 3.8% with regards to renting a house or flat. Other parts of Spain where prices rose less than the rate of inflation were Asturias (3.6%), Extremadura (3.4%), Galicia (3.2%) Castilla and León (2.8%) and the Rioja (2.4%).

According to official statistics provided by INE house insurance policies went up by 3.6% over the last year, which is just one point less than the official rate of inflation. Although there was no increase with regards to house insurance from April to May. Housing insurance policies taken out by customers over the last year covered amongst other things fires, floods, damage to electrical installations and being burgled.

Good moment to buy property in Spain

The Minister for Housing, Beatriz Corredor, has stated that ‘now is the right time’ to buy a flat given that prices are now rising in line with the rate of inflation. She also asked property promoters to ‘adjust’ their offers to meet the needs of buyers.

During an interview with TVE, Corredor pointed to the fact that some property promoters had lowered their prices as a clear indicator that ‘now is the right moment to buy a flat or house’ for those people who really need to although this might not be the case for those people thinking about acquiring a second residence.

Alter confirming that houses and flats are now rising in line with the official rate of inflation Corredor explained that currently there are 600,000 empty houses and flats in Spain compared to a demand for around 450,000. In her opinion this situation has led some promoters to adapt their offers to the demands of the market.

This is partly why Corredor believes that the property market needs to readjust itself. She firmly supports the model of what she calls ‘intense’ construction based fundamentally on renovation compared to ‘extensive’ construction which has developed previously unused land over recent years.

She also said that given the present situation the construction of 600,000 houses and flats per year was unsustainable, she also added that the 18% contribution that the construction sector made to GDP was much higher than desirable for a country like Spain when in the US the construction sector contributed around 12% to GDP.
Corredor recognised that the current economic slow down and financial crisis, together with the rise in interest rates, had caused some families difficulties when trying to buy a house or flat or meet their mortgage repayments.

Nevertheless, she said that the government had approved measures to lengthen the terms of repayment with regards to mortgages and to help young people become more independent.

Corredor also said that those people who could not afford to buy their own property should rent that the government was aiming to make 40% of all new subsidised housing over the next 10 years available for rent only.

In a recent statement to the press the Spanish Association of Investment Advisors and Finance (AIF) said that it is essential for a guiding price to be placed on properties and to reduce costs for consumers to end the lack of confidence in the property market, which is one of the biggest problems for the economy at present.
According to these experts a guiding price would facilitate access to finance given that banks and other financial institutions are now unwilling to concede mortgages for more than the total value of a property over a 50 year period.

Members of the association underlined the need to work with professional advisors because a significant number of people who could not meet their mortgage repayments had been processed by people who had not considered the most elemental rules of risk assessment.

Property surplus in Spain

Report forecasts a surplus of over a million properties in Spain

A report compiled by the consultancy agency Forcadell together with the University of Barcelona (UB) presented last week by the expert and professor Gonzalo Bernardos, states that ‘practically nobody is selling anything’ and stresses that there is no lack of properties in Spain. In fact, according to the report by the end of this year there will be almost a million surplus properties for sale.

Forcadell believes that the steps that need to be taken are primarily to assess the real situation. It also believes that possible solutions lie in not trying to stimulate the production of more flats but to allow for a cooling off period in which a large part of the actual stock could be absorbed into the property market.

Forcadell proposes a packet of measures. Firstly, the opening of a period of ‘indefinite’ sales in the prices of properties something which would imply a substantial reduction in current prices and would be uniform for each city.

It has also suggested that the special promotions included in the campaign of sales should be financed under special conditions. According to the consultancy agency the cost of the subsidy in the interest rate, which would be guaranteed over a period of five years at 2.5% and which would also include loans of up to 100% the value of the property should be shared by property developers, banks and building societies.

In recent reports Forcadell gave clear warnings over the difficulties the property sector was facing. According to its forecasts the price of property in Spain will go down on average by 20% between 2007 – 2009, a fall caused principally by the excess number of available properties and a significant drop in demand for properties. In his opinion, speculators and investors will not get good results which will lead many of them pull out of the property market all together and invest there money elsewhere.