Property sector in limbo after elections

Property sector in limbo after elections

5th January 2016, Comments 0 comments

Despite a promising property growth outlook before the elections, political instability has put the sector in limbo.

On the evening of the general elections in Spain last 20 December, the economic future of the country, and therefore the property market included, looked extremely promising and positive.

Well-known economists forecast sustainable growth of 2.5% for the forthcoming years, based on the renewed growing interest from foreign investors.

However, after the election’s results failed to produce a clear winning political party, the whole recovery of the economy has been left on ‘standby’, which will most likely continue until the situation of limbo has been resolved.

With three political parties capturing around 20% of the votes each and a fourth party with 14% (Ciudadanos), it’s difficult to see how this situation will pan out. And that’s why major investors, who are all in favour of a strong government that will effectively push for economic recovery, have now chosen to just sit back and wait to see what evolves.

The property sector is one market that will be hugely affected by the results. Right in the midst of a normalisation procedure after seven years of falling house prices and volume of transactions, 2016 should be looking bright.

Property sales in October last year went up 2.7% annually, reaching 35,088 transactions for that month, and house prices fell minimally by 0.3% from October 2014 to register 1,226 euro/sq. m.

According to BBVA Research and BBVA Real Estate, the normalisation procedure of the property sector in Spain will become more noticeable and even more intense during 2016.

The latest report from the bank anticipates a greater number of property purchases and new construction for this year before us.

Additionally, for the first time since the start of the economic crisis, the bank’s experts believe that revenue from the sector will begin to add value to the country’s GDP.

Investment into property is expected to grow 3.4% annually in 2015, which would increase 0.2% to Spain’s GDP for the year. In 2016, this figure is forecast to rise to 7.1%.

According to the bank, the key to such a positive outlook will be in the renewed demand for residential property in Spain.

However, the political instability could shake things up and possibly worsen the situation if the end result means that the labour market doesn’t continue to improve, households have less disposable income, consumer confidence drops or demand from foreign investors declines.

Bankinter is also optimistic with regards to the situation of the property market over the next few years, although it states that a fall in the population could have a negative impact on that. It also warns that for the sector to recover, an improvement in the country’s GDP and employment sector is a must.



© On the Pulse of Spain

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