According to data from Forcadell’s Residential Market Report 2S 2016, there is a remarkable surge in new construction developments in Barcelona. La Sagrera and La Magòria areas concentrate most of these projects.
The requests for new construction developments have increased throughout 2016 due to several factors such as the improvement of the employment market or renewed access to bank loans. Furthermore, the rental and sales markets evolve positively, contributing also to the dynamization of the sector.
HOUSING RENTAL MARKET
DEMAND
According to data from the Forcadell Residential Market Report, during the second half of 2016 the demand for rental apartments in Barcelona has continued to increase, just as it did at the beginning of the year. It is important to take into account when analyzing the evolution of the rental market that part of the demand and the product has been transferred to the sale market, since some owners opt to sell their property rather than renting it. As for the profile of the applicants for rental apartments in the city of Barcelona, the main groups who are renting are foreigners who come mainly for work, young people, students and couples (with or without children), both national and international, who especially value the communications network with public transportation.
SUPPLY
The data from Forcadell points out that the Eixample, Sarrià-Sant Gervasi, Ciutat Vella and Sant Martí districts are the ones that concentrate the majority of the supply for used properties, while in Sant Andreu and Les Corts there is less availability at present moment. It is also important to emphasize the need for developable land to build in urban centers. Currently, in the center of Barcelona there is no developable land left, so new promotions that are being carried out are located in La Sagrera or Magòria.In areas where there is a chronic shortage of developable land to build, there is a trend towards establishing full building restorations. The residential market is advancing at double speed, where large cities like Barcelona or L'Hospitalet de Llobregat grow faster than the peripheral municipalities.
PRICES
The evolution of the residential market, as the consulting firm has pointed out, has registered a significant increase in prices in the rental market in Barcelona. The imbalance between the high volume of demand and the scarcity of supply has meant that the average rental price of a home in the city of Barcelona is now €15/sqm, which represents a 7.9% year-on-year increase. All the districts of the city have seen a rise in prices, being the Eixample and Sant Martí neighborhoods where this rise has been the highest. By contrast, in Les Corts or Sarrià-Sant Gervasi the increases have been more moderate. Currently the rent is offering an average of 5% revenue, much more interesting than other investment products.The vast majority who opt for rental product are small investors who prefer to collect rent rather than lower bank interest rates.
HOUSING SALE MARKET
DEMAND
As the Forcadell report highlights, the replacement buyer demand remains as the main driving force boosting the market. The improvement in household economies has made it viable for families to opt for buying a better home. Added to this is the fact that banks have started to offer access to mortgages again, 40% at fixed interest rates. Improvement of quality of life is the main request of occupier demands, many of whom are tenants who want to change their status to homeowners. There has been an increase in demand from family households and, at the same time, a moderate decline in Core investment companies.Property owners no longer make adjustments to be able to sell since there is currently a balance between prices for commercialization and purchase prizes.
SUPPLY
The data from Forcadell points out that the Eixample, Sarrià-Sant Gervasi, Ciutat Vella and Sant Martí districts are the ones that concentrate the majority of the supply for used properties, while in Sant Andreu and Les Corts there is less availability at present moment. It is also important to emphasize the need for developable land to build in urban centers. Currently, in the center of Barcelona there is no developable land left, so new promotions that are being carried out are located in La Sagrera or Magòria.In areas where there is a chronic shortage of developable land to build, there is a trend towards establishing full building restorations. The residential market is advancing at double speed, where large cities like Barcelona or L'Hospitalet de Llobregat grow faster than the peripheral municipalities.
PRICES
The strong demand for housing by foreigners in the Catalan capital, mainly for investment, has led to an inevitable increase in sales prices. In fact, 15% of these buyers are of foreign origin. The Eixample and Ciutat Vella are the districts that have suffered most this impact. This situation suggests that the evolution of sale prices will lead to an increase of 5% next year, mainly in the big cities, given the positive evolution of the market. Regarding the volume of operations, there is an estimate of growth of 10%, according to data from Forcadell. The forecast for the next 24 months is also favorable. All this will be possible due to the improvement of the employment market and the increasing interest in investing, among other factors. In overall terms, for the country as a whole, it is estimated that in 2017, 500,000 homes will be sold.
NEW CONSTRUCTION DEVELOPMENT MARKET
MARKET CONTEXT
The Forcadell Residential Market Report for the 2nd half of 2016 shows the city center suffers a chronic shortage of developable land to build, and, consequently, there has been an increase towards full building restorations. Banks no longer finance land acquisition, which to some extent is healthy for market stability. Requests for new construction have grown significantly in 2016 in major cities and this trend is expected to continue. Factors such as improved employment and access to bank loans have been decisive for this increase. There has also been a significant rise in sales of pre-let agreements after 2 years of compression. The applicants' profiles are, on one hand, young couples with economic stability who want a new home and, on the other hand, families that seek to improve their homes by buying new one or even buying to invest. These buyers are mainly looking for peace of mind, guarantees, good materials and the possibility to live in a brand new home.
SUPPLY
According to Forcadell, La Sagrera and the Magòria districts concentrate the majority of residential projects in Barcelona. Outside the city center, L'Hospitalet Llobregat, Sant Just Desvern, Sant Cugat, Badalona and Sitges, are developing new constructions that will be completed in 18 to 24 months. Most of these sales are pre-let agreement sales due to excellent momentum the market is experiencing, and the fact that and there are some buyers that limits their search to the new construction homes. This fact benefits the promoters who finance part of their construction with the advanced payments. Promoters also expect a significant downsizing of local regulations to speed up the developments of new projects.
PRICES
The evolution of new construction development prices, as pointed out by Forcadell, began its recovery in late 2014 to reach current levels. However, it should be noted that the shortage of product is causing some tension in prices. Generally speaking, the average price €/sqm in Barcelona stands at €5.00/sqm. Leading the ranking of districts with the highest average price is Les Corts with €6,767 /sqm, followed by Sarrià-Sant Gervasi with €6.553/sqm and Eixample with € 6,253 / m². On the other hand, those who are looking for a new construction building with a cheaper price can choose Nou Barris with an average price of €3.100 / sqm, Horta-Guinardó with €3.507 / sqm or Sants-Montjuïc with €3,970 /sqm. Beyond Barcelona city, other municipalities with an outstanding activity are Sant Cugat del Vallès (€3.790 /sqm), Sabadell (€2.987 / sqm) or Sitges (€3.238 / sqm). The number of residential developments of new construction, both in Barcelona and in outstanding province towns, is evolving positively.
FORECAST
Forcadell forecasts indicate that in the short term, the pace of the absorption rate of existing stock could leave the city of Barcelona in an all-time low, due to the scarcity of developable land to build, the selling of stock and the rapid commercialization of new construction product.This forecast predicts construction will increase 20% at national level, a very positive figure for the sector. Albeit the housing situation of new construction developments is very optimistic, the experience of the previous decade featuring an oversized market ending in a housing bubble is ruled out. Financial entities, on their behalf, are assisting the sector by lending both to buyers and developers.
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