Spanish existing-home prices jump 7.8% in 2018, most in a decade

[MADRID] Prices for existing homes across Spain jumped in 2018 by the most in at least 12 years, as the country continued recovering from one of Europe's worst property crashes.

The 7.8 per cent average annual increase was an acceleration from 5.1 per cent in 2017, according to real-estate research firm Fotocasa.es. House prices leaped the most in Madrid, by 19.5 per cent. The market was still uneven, with regions like Murcia on the Mediterranean coast dropping 3.3 per cent last year.

In a market world-famous for vacation homes and increasingly targeted by buy-and-rent investors, prices are still down almost 40 per cent from their peak in April 2007. In the ensuing years, the real-estate crash and banking crisis drove the government to seek a bailout for some of its mortgage-heavy lenders, which responded by halting loan applications and new construction.

The turnaround gained strength through a combination of economic expansion and an easing of credit terms, in addition to a persistent lag in new supply and recently a flood of investors.

Following Madrid, the regions with the greatest appreciation were the Canary and Balearic islands, followed by Catalonia and Valencia - all with extensive coastlines and traditional destinations for holiday homes.

While Spain's economy probably slowed its expansion to 2.5 per cent in 2018, according to forecasts from the Bank of Spain, that's still more robust than many of its European peers.

"The awakening of the latent demand, the appetite from investors and the profitability from rentals in a low interest rates environment explain this return of interest in housing, and that's had a direct impact on prices," Beatriz Toribio, head of research at Fotocasa said in a note.

BLOOMBERG