House prices rise 17pc

28 April 2004

MADRID – New houses have more than doubled in price in the past five years, according to figures released Wednesday.

Since the end of March 1997 and the same period this year, homes have gone up by nearly 110 percent on average.

The biggest rises were in the Balearic Isles, where prices have increased by 146 percent.

Madrid and Barcelona have the biggest increases on the Spanish mainland, with increases of 134 percent and 115 percent respectively.

The smallest average increases were in Galicia in north-west Spain and Extremadura in western Spain.

In the past three months, the price of new homes have gone up by 17.3 compared with the same period in 2003.

Homes which have already had an owner have gone up in price by 16.9 percent in the first quarter of 2004.

According to an analysis of the market by the company Property Assessments (TINSA), new homes now cost on average EUR 1,682 per square metre.

The average cost of ‘second-hand’ homes is now EUR 1,389 per square metre.

Meanwhile, a study predicted house prices would rise by between 12 and 17 percent during 2004.

Metrovacesa property company said the increase in prices would not be as much as in 2003, when homes went up by 17.4 percent.

But the study added that the “principal reason” for the increase in house prices was reduction in interest rates.

During 2004, interest rates were not expected to rise higher, analysts said.

It added: “During this period the rise in prices could still be significant”.

But it did not expect a fall in the number of houses which went on the market.

Metrovacesa said that at least 636,000 new homes were expected to be built during 2004.

In the opinion of analysts, the ‘strong inflation’ in the Spanish property market since the end of 1997 was due to an increase in demand as well as the lower types of interest and longer-term borrowing together with the increased number of homes on the market.

All these factors have helped to reduce the debt created by the rise in housing demand.