The Latest Spanish Property News from Kyero.com

According to the Bank of Spain, foreigners bought almost 100,000 holiday homes in Spain last year, spending a record 7.2bn Euro.

Foreign demand for a second or retirement home on the Spanish coast is still there, but there are signs that growth is starting to slow. New housing starts this year are forecast at 585,000, down 15 per cent year-on-year. Some property developers are starting to follow the bigger operators abroad. Confronted with increasingly squeezed margins at home and diminishing tracts of beachfront land, they have crossed the border into Portugal.

In the future, developers will also have to abide by tougher environmental regulations as regional and local authorities follow the lead of Lanzarote, one of the Canary Islands, where a 10-year moratorium on tourism-related construction has been in force since 2000.

A recently-completed study concluded that Lanzarote’s economic sustainability would only be assured through refurbishing and improving existing tourist infrastructure, preserving and promoting the island’s unique ecosystem and recovering traditional industries such as agriculture and fishing ..

From the Financial Times special report on Spain 2004 (subscription required)

The Spanish property boom continues, fuelled in part by an abundance of cheap credit. Bank loans in mid-2004 were growing at an annualised rate of 16.3% - six times the 2.6% rate of growth in the economy. House prices, which have more than doubled since 1996, rose by 17% in the first six months of 2004.

Elsewhere in Europe, such frothiness would lead to a hard fall. But there are unique factors in Spain which would explain the sustained demand for homes, and which may shield it from a violent crash.

The strong demand for homes is underpinned by a rising population (thanks to a large influx of immigrants), A sharp growth in employment, up 22% since 1995, and the demand for retirement or holiday homes from sun-starved north Europeans ..

From the Financial Times special report on Spain 2004 (subscription required)

Last month, Spain was singled out in the European Central Bank’s monthly bulletin as having the biggest residential property inflation in the euro area, with the country’s housing prices increasing at a rate nearly two-and-a-half times the euro-wide average in 2003.

The ECB estimates the average increase in residential property prices across the euro area in 2003 was 7.2 per cent, saying that this is the fourth consecutive year with increases of around 6-7 per cent and that growth rates “are currently close to their highest point since the early 1990s.”

Between 1999 and 2003, housing prices increased at arate 4 to 5 percentage points higher than the Harmonised Index of Consumer Prices, says the report.

In the case of Spain, housing prices jumped 17.3 per cent in 2003, the largest increase in the euro area and some 2.4 times the euro-wide average. The country also tops the list for the rate of increase over the five-year period from 1999 to 2003.

“Spain, Ireland, Luxembourg, the Netherlands and Greece experienced substantial and above euro area average increases” during that period, according to the ECB. The data for 2003 indicates price increases slowed down in the Netherlands, Greece and Ireland. “However, in Spain, residential property prices accelerated further in 2003:’ says the report, which goes on to state that “the latest available quarterly data for 2004 confirm the strong increases” in Spain.

Read the full monthly bulletin from the European Central Bank

Is any property below €50,000 a cheap Spanish property? Are cheap Spanish properties only to be found at auction or as bank repossessions? How much below market value does a Spanish property need to be to be considered cheap?