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In spite of these figures, market sentiment is advocating a gradual cooling in demand in the course of 2006, as is shown by the longer sales periods for developments and the increase in houses in stock which are still on sale. In fact, as Ministry of Housing figures show, not all the housing built is sold and this will eventually be reflected in a change in the dynamics of housing demand.
In addition to all of this, investment on the part of non-residents is falling and continues to lose weight in the economy, representing 0.59% of the GDP in the first quarter of 2006. In any event, the volume of net investment in real estate made by foreigners amounted to 1,115 million euros, a year-on-year decrease of 10%. However, for the second quarter in succession, the downturn in entries of investments in property has become more moderate; the figures accumulated over twelve months show a 15% reduction in the first three months as compared to the 18% decrease in the series in September last year.
Table3.1. Annualized quarterly growth of the house prices trend
March.06
Dec.05
Variation
Spain
11.8%
12.0%
-0.2%
Andalusia
12.7%
12.7%
0.0%
Aragon
16.0%
13.3%
2.7%
Asturias
9.4%
9.6%
-0.2%
Balearic Islands
13.5%
10.5%
3.0%
Canary Islands
9.1%
7.9%
1.2%
Cantabria
18.1%
12.2%
5.9%
C-La Mancha
12.1%
11.0%
1.1%
C-Leon
12.4%
10.7%
1.7%
Catalunya
16.4%
13.2%
3.2%
Region of Valencia
16.0%
13.8%
2.1%
Extremadura
9.4%
9.7%
-0.3%
Galicia
15.3%
15.4%
0.0%
Madrid
9.9%
8.6%
1.2%
Murcia
9.3%
10.2%
-0.8%
Navarre
8.7%
9.1%
-0.4%
Basque Country
14.8%
11.3%
3.4%
La Rioja
13.8%
13.3%
0.4%
.......stops the deceleration in housing prices
The figures for the first quarter of 2006 indicate that the average price of housing was 1,887.6 euros per square metre in Spain, a year-on-year increase of 12%. Although the series showed slightly gentler growth than in the previous quarter, the analysis of the trend shows that this deceleration has come to a halt, and this is an additional risk for the expected adjustment.
The performance of housing prices in the first quarter of 2006 came as an upward surprise, with higher-than-expected increases in the main self-governing regions. Thus, in Catalunya, the Region of Valencia and the Basque Country, prices in the early months of 2006 increased more than in the last quarter of 2005. This breaks the more moderate price trend that had been observed in the last eight quarters.
In this respect, when the figures for the trends in the different self-governing regions are aggregated and weighted by the number of appraisals, a rise is observed in the performance of the price trend in the last two quarters. This would largely be explained by the greater contribution from Catalunya, which has increased its weight by one percentage point during the period, and from Madrid and the Region of Valencia, which both increased their weight by 0.6 percentage points.
In relation to the type of housing, the variation in prices in the first quarter of 2006 was similar for new and existing housing, with an increase of 12% in both cases. The growth paths of these rates, however, have performed differently since the last quarter of 2005: while the increase in the price of existing houses fell from 14% to 12%, new housing appreciated by two points to reach 12%. Existing houses, which are less subject to cost restrictions, are more flexible in respect of market performance, with higher rises in prices than new housing at times of strong demand and smaller rises when demand slows.
Source: BBVA Economic Research Department
Chart 3.4.
Price of open-market housing
% year-on-.year variation
20%
16%
12%
8%

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