The Graphs presented display the price indices of the Balearic and Spanish housing markets. After the disastrous impact of the financial crash, property prices in the Balearic Islands and Spain as a whole have shown a strong recovery since the low in 2014.
The imposition of extensive austerity measures, necessitated by a European Bailout in 2012, severed domestic demand considerably. Paired with the overall impact of economic recession on the European market as a whole, depressing off-shore demand, the Balearic and Spanish property markets until 2014 underwent a difficult decline.
Since then (2014), the Spanish and Eurozone economies have shown encouraging signs of growth. Reported recently, the Eurozone in 2017 recorded growth at its fastest pace for a decade, with the 19-nation bloc growing at 2.5%. Growth estimates for 2018 have been revised upwards by the European Central Bank, with hopes for prolonged period of prosperity widely felt. Spain’s own performance has also been positive, with unemployment falling to its lowest point in almost 10 years. The revival of Spanish demand is crucial to national house prices, the Balearics included, where despite strong international demand Spanish buyers are still in the majority.
Provisions for the future are optimistic. Despite reduced British demand as a result of Brexit uncertainty, it is more than being accounted for by growth in demand from EU countries. French, from a 3.78% share to 6.3%, Russian and Italian buyers grew significantly in number between 2016 and 2017; with the upward trend continuing in 2018. There are also signs that American and Chinese buyers are being enticed by prices considered good value, as well as by all the charms of Spanish landscapes and culture. The Spanish economy has, however, been slowing due to a small contraction in exports during Q2 and slow consumption growth. This was expected as high growth rates post-crash turn to more steady and robust gains. 2019 has had growth estimates revised upwards to 2.4%; and looks to be another year of progress. Growth estimates are reflected in the Balearic housing market and the National market as a whole, with the Balearic house price index growing 2.8% on Q1.
Despite the slowing economic outlook, Local and National property markets will continue to make significant headway towards the pre-crash peak of 141.55. All things considered, both heart and mind can agree that 2018 is an excellent year to enter the market.
Quarter 2 Summary Spanish and Balearic Islands Property Market
In the second quarter of 2018 the Spanish property market has continued to grow strongly. The Balearic house-price index has grown 2.8%, and the national market 2.6%, on the first quarter. This reflects growing confidence in the National economy, because although the economy as a whole has slowed in the second quarter of this year- this was expected as Spain transitions into more steady and robust growth. The boost to total mortgages issued has shown no signs of slowing, keeping domestic demand on the upward trend; and with the ECB expected to keep interest rates at 0% until the summer of 2019 the foreseeable future is cause for continued optimism.
Furthermore, Spanish Bank BBVA has published a report forecasting further growth in employment, with unemployment falling at a 3% rate for 2018, which will underpin future economic gains. This will continue to drive the property market forward as domestic spending power strengthens, supported by the afore-mentioned growth in mortgage issuance.
Quarter two then, although demonstrating a higher quarter on quarter increase in property prices than Q1, is not without concern. The economy, although foreseen, has slowed to a steadier rate of growth. This may, however, be positive as confidence in forecasts grows and investors become more assured of the future. The Balearics continue to be supported by Eurozone growth and 0% interest rates, maintaining a positive outlook for Q3 and Q4 2018 and into 2019.