The Bank of Spain reports even stronger house price rises. During the year to end-Q1 2016, Spanish house prices rose by 6.34% (7.05% inflation-adjusted). On a quarterly basis, house prices increased 1.45% (3.58% inflation-adjusted) in Q1 2016.
Spanish house prices fell by a total of 41.4% (46.8% inflation-adjusted) from Q4 2007 to Q3 2015, based on figures from TINSA. There were 30 consecutive quarters of y-o-y declines:
- In 2008, Spanish house prices fell 7.71% (-9.86% inflation-adjusted)
- In 2009, house prices fell 6.88% (-7.07% inflation-adjusted)
- In 2010, house prices fell 4.03% (-6.4% inflation-adjusted)
- In 2011, house prices fell 7.64% (-10.11% inflation-adjusted)
- In 2012, house prices fell 12.05% (-14.67% inflation-adjusted)
- In 2013, house prices fell 8.31% (-8.48% inflation-adjusted)
- In 2014, house prices fell 4.45% (-3.92% inflation-adjusted)
- In 2015, house prices rose by a meagre 0.25% (0.53% inflation-adjusted)
In 2015, the total number of home sales in Spain increased 11% to 354,513 units from the previous year, according to the Instituto Nacional de Estadistica (INE). †This rise in transactions was mainly driven by foreigners buying homes on the coast and in cities like Barcelona and on the Costa del Sol, one of the countryís most popular areas with overseas purchasers.
Britons remain the number one foreign homebuyers in Spain, making about 21% of all home purchases by foreigners in 2015, followed by the French, Germans, and Swedish buyers, each accounted for about 6% to 7%.
Foreclosures stood at 11,278 dwellings in Q1 2016, down by 14.7% from the previous quarter and down by 36.7% from the same period last year, based on figures from the INE.
Spanish house prices will increase by around 5% this year, according to a forecast by Moodyís credit rating agency.
In the first quarter of 2016, the Spanish economy advanced 0.8% from the previous quarter, the same as in the previous two quarters, despite political uncertainty after inconclusive general elections in December last year - the 11th consecutive quarter of growth. The economy is expected to grow by 2.6% this year and by another 2.5% in 2017, after growth of 3.2% in 2015 and 1.4% in 2014, and contractions of 1.7% in 2013, 2.6% in 2012 and 1% in 2011, according to the European Commission.
Analysis of Spain Residential Property Market »
The gross rental yield for apartments in Barcelona ranges from 3.80% to 4.70%, whereas in the centre of Madrid, rental yields are better, ranging from 3.91% to 4.92%. In Madrid-suburbs, rental yields range from 4.11% to 4.87%.
Prices per square metre (sq. m.) of apartments in Barcelona range from around EUR 3,300 to EUR 4,100. In the heart of Madrid, i.e., ChamartŪn, ChamberŪ, Retiro and Salamanca, prices per sq. m. range from around EUR 3,400 to EUR 3,800. In nearby upscale suburbs of Madrid such as Las Rozas, Majadahonda and Pozuelo de Alarcůn, apartments are cheaper, with prices per sq. m. ranging from around EUR 2,600 to EUR 2,700.
The centre of Madrid fetches the highest rents per sq. m. Apartments here cost around EUR 11 to EUR to EUR 14 per sq. m. to rent per month or the equivalent monthly rental income of around EUR 970 for a 75-sq. m. apartment.
Apartments in the suburbs of Madrid cost around EUR 9 to EUR 11 per sq. m. to rent per month or the equivalent monthly rental income of around EUR 1,100 for a 120-sq.m. apartment to around EUR 2,300 for a 250-sq. m. apartment.
In Barcelona, rents per sq. m. per month range from around EUR 11 to EUR 14 or the equivalent monthly rental income of around EUR 950 for a 85-sq. m. apartment, to around EUR 2,300 for a 200-sq.m. apartment.
When buying property, take into consideration that round-trip transaction costs are moderate to high in Spain.† See our Property transaction costs analysis in Spain and Residential property transaction costs in Spain, compared to the rest of Europe.
Property and Wealth: A special annual 3% tax is levied on the cadastral value of real estate owned by nonresidents.
Capital Gains: Capital gains tax realized by nonresidents are subject to flat rate of 20%.
Inheritance: Each beneficiaryís inheritance is taxed at progressive rates, from 7.65% to 34%, after certain tax-free amounts have been deducted.
Residents: Resident individuals are liable to tax on their worldwide income and assets at progressive rates, from 24.75% to 52% for 2012 and 2013.
For new properties, Value Added Tax, plus stamp duty, is imposed instead of property transfer tax.
Rent Control: The landlord and tenant have the contractual freedom to fix the rent and state the due date of payment. However, rent increases are tied to the Consumer Price Index and limited to once a year.
Tenant Security: The 1994 Urban Tenancy Act aimed to restore balance between the interest of landlords and tenants. It failed. Tenants are guaranteed tenure for five years. Courts are painfully slow in resolving cases of tenant eviction and compensation for rental arrears and damages.
In the first quarter of 2016, the economy advanced 0.8% from the previous quarter, the same as in the previous two quarters, despite political uncertainty after an inconclusive general elections in December last year - the 11th consecutive quarter of growth.
It has been a long, hard slog. Recession has been Spainís normal condition for years. The economy shrank by 1.7% in 2013, according to the IMF, by 2.6% in 2012 and by 1% in 2011. In 2010, the economy grew by a meager 0.02%, after a contraction of 3.6% in 2009.
The economy is expected to grow by 2.6% this year and by another 2.5% in 2017, according to the European Commission.
Spainís economy was fuelled by property during the boom decade from 1997 to 2007. At the height of the housing boom in 2007, housing investment was no less than 7.5% of Spainís GDP, significantly above the OECD average. The construction industry became a key employer of low-skilled workers. The increase in construction activity helped pull unemployment down from 24% in 1994, to 8.3% in 2007.
With the situation reversed, Spanish unemployment now stands at 21% in Q1 2016, down from 23.8% in Q1 2015 and 25.9% in Q1 2014, according to the INE. Despite this, Spainís unemployment is still the second highest in the OECD, next to Greece. The countryís overall unemployment rate is expected to be 20% at the end of 2016 and to fall further to 18.1% in 2017, according to the European Commission.
In June 2016, consumer prices fell by 0.8% from a year earlier, from annual declines of 1% in May, -1.1% in April, and -0.8% in February and March 2016, according to INE. Annual inflation is expected at 0.1% this year, from -0.6% in 2015, and -0.2% in 2014, according to the European Commission.
Spain narrowed its budget deficit last year to 5.1% of GDP, down from 5.9% in 2014 and 7% in 2013 still higher than the target deficit of 4.2% of GDP. Due to its failure to meet its target, the European Commission has recently proposed to fine it, together with Portugal, in an effort to enforce rules designed to avert another debt crisis. Should the recommendation be approved, fines can reach as high as 0.2% of GDP and a suspension of some regional funds.
The deficit is projected to fall to 3.9% of GDP this year and to 3.1% 0f GDP in 2017.
Spainís gross public debt stood at about 99.2% of GDP in 2015, a slight decline from 99.3% of GDP in 2014. It is expected to increase further to 100.3% of GDP this year, according to the European Commission.