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Is Spain close to the risk of a property price bubble?

During 2020, due to the coronavirus pandemic, the world economy suffered a contraction in all productive sectors. The housing market fell to historical lows in its sales transactions, also producing a parallel increase in real estate prices in all the member countries of the European Union.

There are significant differences in the rate of increase in properties that have occurred between the different member countries. For example, in Luxembourg there was an increase of 13.3%, while in Croatia and Portugal there were increases of 7.4%. Slovakia with 7.2%, Poland and Germany, both with 7%, exceeded the 6% threshold in the annual growth rate of the real House Price Index.

The European Commission has considered that this increase in property values ​​represents a bubble risk for the real estate sector. These countries are not the only ones to show variations in their markets, some are even above that threshold, such as the case of Estonia with 6.7%, Austria with 6.5% or Lithuania with 6.4%. .

According to the statistics, Spain presented an increase of 2.1% in the HPI (House Price Index), so it is far from entering the risk of a real estate bubble. Hungary presented 1.6% and Finland with 1.4%. Cyprus and Ireland presented increases of 0.7% and 0.1% respectively. Italy is in a similar situation to Spain, with 2.2%, and France, with 4.4%.

Is Spain at risk of falling into a property price bubble?

As revealed by studies, a growth rate that is too high, that is, estimated above 6%, can be considered an early warning indicator of tensions in the real estate market, which can accelerate the risk of falling into a housing bubble. prices.

In the last decade, Spain did not register significant annual increases located above the 6% indicated by the MIP, marking only in 2018 an increase of 5.2%. Since 2014, house prices in our country have been adding rises from 0.2% without exceeding the risk of a bubble at any time. Gone are the four years of consecutive declines after the bursting of the housing bubble with declines of -3.7%, -12.5% ​​and -10%.

For its part, Portugal has chained five consecutive years of increases above the real estate bubble risk threshold. In 2015, there was an increase of 6.1%, reaching 8.6% in 2018. In 2019, it fell to 7.4%.

Italy has not reached risk data either, according to the report. In fact, it has registered negative data throughout the decade, except for a slight increase of 0.2% in 2016. In 2020 there was an increase of 2.2%, the highest recorded in the last 10 years. Indeed, Spain and Italy have been the only two large European economies where house prices have fallen since 2010.

Rents and house prices in the EU have continued their increase in the beginning of 2021, with increases of 0.4% and 2.2%, respectively, compared to the previous quarter. If current data is compared with that obtained in 2010, an increase in rentals of 15.3% can be established, and in housing prices up to 30.9%.

How has the increase in rental prices been?

House prices have grown in 23 countries, with falls in the remaining four, leading the list Greece with -28.1%, followed by Italy with -14.4%, Cyprus with -8.9% and Spain with -4.8%. According to Eurostat analysis, between 2010 and the second quarter of 2011, house prices and rents in the EU followed similar paths.

While rents have been rising steadily through the first quarter of 2021, home prices have fluctuated significantly. After a sharp drop between the second quarter of 2011 and the first quarter of 2013, house prices remained more or less stable between 2013 and 2014. They then increased progressively from the beginning of 2015.

Regarding rents, rents increased in 25 EU states, decreasing in only two: Greece with -25.2% and Cyprus with -3.8%. The largest rent increases have been in Estonia with 140.4%), Lithuania with 108.6% and Ireland with 63.3%. In Spain, current rents have only registered a rise of 4.3% compared to 2010. This is the lowest increase in rents in the entire EU, accompanied by 5.3% in Slovakia, 6.4 % from Italy and 8% from France.

House prices increased more than rents during this little more than a decade in 17 EU countries. Rental income has outperformed sales prices in Estonia, Lithuania, Poland, Ireland, Finland, Romania, Spain, Cyprus, Italy and Greece.

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