Property News

Housing Investment Predicted to Recover Next Year

According to BBVA Research, the decline in home sales will begin to slow this year and start recovering in 2015. The bank’s research service estimates that housing investment will rise by 5% in 2015, when it will resume a positive trend after accumulating seven consecutive years of declines.

This is stated in their latest report, Situation Spain, which notes that housing investment will contract by 3.4% in 2014, maintaining the downward trend of previous years, and return to growth again next year.

The BBVA data indicate that housing investment should close 2013 with a decline of 8.4%, representing six consecutive years of declines, which would place its weight in the economy at record lows.

The bank explains that: “after six years of intense adjustment in the real estate sector, 2014 will become the year of transition to stabilisation, and is expected to end with a more moderate adjustment in housing investment than in recent years”.

Thus, they indicated that “it will be in 2015 when we begin to see a recovery in this type of investment.” “This growth will correspond to a relatively small increase in activity, given that housing investment will start from historically low levels of around 4% of GDP, the lowest ratio since 1980″.

BBVA believes that in the domestic demand for housing, “improvement is expected in their fundamentals over the next two years”. The reasons are that the labour market forecasts point to job creation starting from this year, and that mortgage rates will remain stable, and may even decrease slightly in 2014, and stand at around 3% in 2015 due to a reduction in mortgage spreads.
Added to this is a recovery in financial wealth and the advanced stage of the process of house price adjustments, which could positively affect demand.

On the other hand, the foreign demand for housing is expected to “remain strong, and new growth is expected in the next two years”. However, they predict that, during 2014, the decline in home sales in Spain observed until 2013 will begin to slow, and start to recover in 2015.

Thus, as reported in El Mundo, the BBVA stated that in 2014-2015 the context in which the market will move, will be different from the immediate past, and they believe that: “in an environment with a gradual recovery in demand, the supply will continue to tighten due to the smaller number of homes being completed in the coming years, which could bring about the stabilisation of housing prices in 2015″.