Spanish mortgages: the obstacle on the road to recovery?

The signs for Spanish property are positive, with sales up, prices rising and construction even climbing in the second half of 2014. While 2015 is set to be the year of recovery, though, could mortgages prove to be an obstacle on the road ahead?

Estate agency Lucas Fox is confident about the prospects for the coming 12 years.

Alex Vaughan, Lucas Fox Co-Founder, says that prices have fallen by up to 40 per cent in some parts of Barcelona, but that in more desirable areas (such as Eixample) are starting to see values creep up.

"We don't envisage prices rising across the board for at least another 12 months and, when it does happen, we expect the increase to be slow and steady," he comments.

Nonetheless, he forecasts 2015 as the recovery year for the Spanish property market, "driven mainly by increasing numbers of overseas buyers, including growing numbers of Asian and Middle Eastern investors".

"Those who were deterred by falling prices during the past 7 years or so, such as the British, will return to the market, enticed by some real opportunities," he adds.

Maxim Rettich, Director of Lucas Fox Ibiza, says that the island remains "the place to be", with client numbers increasing by 10 per cent in 2014, a trend he expects to continue.

Rod Jaimeson, Director of Lucas Fox Madrid, says 2014 was "a year of stability and growth" for the city's property market.

"Following several years of crisis and an important price correction, positive economic indicators brought renewed interest from international investors. Madrid remains one of the most reasonably priced European capitals with a high growth potential."

Nonetheless, mortgage lending could be an issue. New residential loans signed in November climbed 37.2 per cent year-on-year, according to the General Council of Notaries. In a research note to investors (published by Spanish Property Insight), though, Santander says that mortgage approvals are the foundation of its doubts about Spain's recovery prospects this year.

"Without an increase in mortgage lending it’s hard to see how the wider Spanish property market can stage any recovery. Ordinary Spaniards have not accumulated enough savings to lift the market as cash buyers."

"As far as Santander is concerned, If there is any growth in credit, it will flow to “small and medium sized companies, not estate agencies."

Tom Maidment, Director of Lucas Fox Costa Brava, echoes the sentiment: "We may begin to see an increase in activity from national buyers – though we don't anticipate the domestic market to pick up in any kind of volume for at least another year."

Despite that, Maidment confirms that the overseas market continues to flourish: "Given the worsening economic situation in Russia and the Rouble's continued struggles against the Euro, the number of Russian buyers will inevitably fall further. On the other hand, the strength of the GB Pound and the likelihood that it will strengthen further against the Euro should attract an ever greater number of British buyers to the market in 2015 as they continue to take advantage of reduced priced Spanish property and favourable exchange rates."

With Spain now vying for the top spot in TheMoveChannel.com's most popular countries, Spanish mortgage lending may prove an obstacle for domestic recovery, but foreign demand for property is already running away down the track.