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March 30, 2017

Experts of BBVA forecast an increase in real estate prices in Spain this year

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Experts of BBVA forecast an increase in real estate prices in Spain this year

The BBVA corporation predicts an optimistic scenario for the Spanish real estate market this year. In particular, the experts of the financial institution believe that the increase in the demand for housing and the reduction of the stock of residential properties will contribute to the fact that the prices of real estate in Spain as a whole will rise. In addition, the creation of employment and the maintenance of interest rates at a low level during this year also indicate the possibility of increasing the prices of residential properties in Spain by 2.5% in 2017.

In a report entitled "The real state of the real estate market in Spain" is pointed out that in 2017 this sector will again contribute to the overall growth of the national economy. In particular, investment in properties in Spain is expected to grow at a rate of 3.2% this year, which will be the fourth consecutive year of growth. Therefore, this investment indicator will be reflected as 0.14 percentage points of GDP growth in the Spanish economy (2.7%), a 5.2% increase per year.

In addition, the estimations by BBVA Bank, which recorded a 13.5% increase in sales in 2016, are that this year the number of transactions will grow by around 7%, which will result in the sale of more than 490,000 homes and apartments in Spain. Domestic demand, supported by the creation of new jobs and the improvement of population incomes, will be the main reasons for this increase.

Special mention should be made about the mortgage market in Spain. The report, in particular, states that "the good performance of mortgage loans in the coming quarters will also support the growth of demand for residential real estate in Spain in 2017."

In addition, recent comments by the Governing Council of the European Central Bank (ECB) indicate that the expansionary monetary policy will continue in the coming months and that current inflation data are due to a greater effect on the increase in energy prices, Rather than TO an increase in core inflation. At the same time, the Research department of BBVA estimates that the first increase in official interest rates will not happen until the end of 2018, which means low interest rates on loans for 2017.

However, according to the same bank BBVA, the Spanish real estate market is not exempt of certain risks. First, improving the global economy can weaken the ECB's expansionary monetary policy, which will raise interest rates and financing costs.

On the other hand, experts believe that there may be unexpected changes in Spanish legislation, which may lead to increased uncertainty about the country's economic policy and will influence the decisions of the participants of the real estate market. Finally, there are geopolitical risks that can also influence the development of the fundamentals of the economy. For example, there is still uncertainty regarding the outcome of the consultation on the exit of the UK from the EU (Brexit), and therefore, its impact on Spain's real estate sector, especially in regions with high demand from citizens of the United Kingdom which are Murcia, the Canary and the Balearics Islands, where in 2015 more than 8% of houses and apartments sold in each region were acquired precisely by the citizens of this country.

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