The year 2017 stands out for two fundamental facts: the acceleration of demand and housing prices throughout the country. The growth in the number of sales is revealed through four premises:

• The closing of buying and selling operations during the first half of the year, becoming the highest figure since 2008. In the last quarter of 2017, 117,068 free home purchase transactions were registered, which added to the total recorded in the year 491,005 operations, 17 percent more than in 2016.
• These same operations have registered an interannual growth of almost 17%.
• The sale of new construction housing has rebounded up to an interannual rate of 5%.
• Prices have experienced an annual increase of 7.7%.

Aspects that have favored the growth in housing demand:

• The reflection of economic growth in the labor market which has led to a decrease in the unemployment rate.
• The low level of inflation allows cheap financing maintaining the current interest rates. The granting of new mortgages continues to grow at a good pace, with significant monthly fluctuations, but with an annual accumulation of 11% that could make us end the year in the vicinity of the 315,000 mortgages granted.
• The profitability of investment in housing; low interest rates and short and medium term fixed income boost the demand for housing as well as investment property.

The general feeling of the national and international real estate sector regarding these increases is highly positive. If the current cycle maintains its actions as it did in the past, we can expect a few years of growth of the real estate market in Spain.

Causes that have led to rising housing prices in Spain:

According to the latest statistics of the Association of Spanish Notaries, residential properties have increased their sales by more than 8% during the year prior to last September. In addition, the prices of these properties have risen 2.4% during that same period of time.

• Shortage of real estate offer, mainly in “Premium” areas.
• The upward trend of the large capitals that set the tone for the real estate market at the national level. Prices have grown in a widespread way throughout Spain, but we still have to talk about two speeds. The big markets with the two archipelagos and the capitals of Madrid, Barcelona, Malaga and Valencia are pushing prices up. However, in many areas of the interior of the country it is still difficult to maintain that pace.
  If something differentiates the current situation from what was experienced in the real estate boom, it is the so unequal behavior of prices. Mallorca, stands out significantly from the rest of Spain with an increase of 29.1% in the last year. Balearics has been one of the hot markets of the year with increases at the provincial and autonomous community level of 25%.
• The increase in rents in the rental of long-term housing due, in large part, to the profitability of tourist rental. The Balearic Islands, with an average price of 12.89 euros per square meter per month, is one of the provinces with the highest rents, only behind Barcelona, Madrid and San Sebastián. 22% of Spaniards live on a rental basis. It is expected that in the next year the number of rental operations will increase with respect to the sale. The price of rents in the last three years has risen more than that of property owned.
• The average price of finished housing (new and used) in Spain reached € 1,264 / m2 in the fourth quarter of 2017, 4.2% more than in the same period of 2016, according to data from the appraisals made by the real estate valuation company. The most striking change compared to the previous quarter is the slowdown of the market in Catalonia, where the average price has gone from growing 12.5% year-on-year in the third quarter to 8.9% in the fourth, while in the Community of Madrid rhythm has increased from 13.2% to 15.1% in the fourth quarter.

In the Balearics, the price of second-hand housing has experienced a rise of 25.3% during the year 2017 to stand at 2,472 euros / m2. The biggest increase was in Palma, where homeowners have increased the price of their homes by 29.1%, which represents the biggest increase experienced by a Spanish capital in the last year.

Situation of the new construction market:

The stock of new construction housing accumulated between 2008 and 2014 led to mark a historical minimum of the sale of this type of property in 2016. The new conjuncture during 2017 and the forecasts for 2018 estimate that:

• The visas for the construction of new construction accumulate an interannual increase of 20% and a reactivation of the new promotions is expected in 2018.
• The prices of urban land continue in an upward trend leading to an increase in investment.
• The current situation leads to an increase in activity and competition among promoters and have good prospects for construction in the short and medium term.
• In inter-annual terms, the granting of permits to start new works grew by 83.8% and 32.4%, respectively. In the first half of the year, the signing of visas was 24.4% higher than in the same period of 2016.

The Spanish property market is accelerating its recovery phase in terms of demand, investment and prices. Residential demand will reach a volume close to 550,000 homes in 2018, driven by improved employment and favorable financing conditions. Everything indicates that during 2018 the real estate market will continue its positive evolution, with increases in the number of transactions and the granting of mortgages, and with a probable rise in prices due to the scarcity of new construction products in large cities. The growth of the real estate sector, together with the increase in confidence on the part of investors and their search for profitability, have led to an increase in the possibilities of investment in the sector.

Real estate market trends for 2018:

• The reactivation of the economy and low interest rates are causing a rise in the real estate sector.
• The increase in prices leads to an increase in the valuations of the assets and, consequently, an increase in the demand of investors.
• The new Mortgage Law will be a true turning point for the financial system, given that its articles introduce measures that will result in greater security and transparency.
• Prices will continue their growth rate during 2018 and the barrier of 500,000 operations will be overcome.
• Investment in construction slowed down in the third quarter of 2017, but its quarterly evolution is very volatile and this slowdown is not significant, its trend shows a high level of dynamism, and by 2018 significant growth is expected.

If you intend to purchase a property in Majorca from a foreign country like England or Germany, you should consider that both the jurisdiction and the processes to be carried out and the roles of professionals involved in it are different.

Throughout the whole process, the presence of a lawyer is essential to be responsible for providing obligatory advice to clients on legal, tax and legal liabilities acquired during the action of sale.

Ripoll&Mateu can fully assist you in the buying process