Spanish home prices failed to keep up with a surge in transactions as a lingering glut of empty homes weighs on the market.
Values rose 1.5 percent in the first quarter from a year earlier even as purchases increased by 9.4 percent, according to data published Tuesday by the National Statistics Institute. Prices fell 0.6 percent in the period compared with the last quarter of 2014.
“Challenging supply-demand fundamentals in the sector are likely to weigh down on the pace of recovery in house prices in the remainder of 2015 and 2016,” said Raj Badiani, an economist at IHS Global Insight in London. “The slower rate of increase in house prices in the first quarter of 2015 was disappointing.”
Spanish home prices fell about 40 percent from peak to trough following the property industry’s implosion in 2007. Though the economy is set grow by 3.1 percent this year and 2.5 percent in 2016, an excess of empty homes and lack of first-time buyers will continue to weigh down price growth going forward, Badiani said.
Spain’s housing market faces long-term challenges as the number of people between 25 and 35 years old, a typical source of first-time home buyers, will decline by 35 percent over the next decade, according to the Statistics Institute. The country has an estimated one million empty homes and also has the second-highest unemployment rate in the euro area at 23 percent.
“Demand for housing continues to battle against some harsh fundamentals, characterized by households still wary of poor labor market conditions, implying the glut of unsold new properties will continue to linger,” Badiani said.