Spanish Real Estate Market Bubble Index (SREMBI) : 2013Q4

The SREMBI goes down slightly during the last quarter of year considering the latest data available, from 1.01 to 0.97. However, analyzing the global trend, we can observe a tendency of the index to move around the equilibrium during the last two years, since 2012Q1. In essence, it means that the bubble already finished in 2011 and since then, the Spanish Real Estate Market has been living, let’s say, in its balanced zone.

 

20140529 SREMBI 2013Q4

Price / Income PER % Constr IPC SREMB index
Equilibrium 5 20 8% 1 1
2012Q4 6,44 18,35 7,85% -8,06 0,95
2013Q3 6,33 17,96 7,42% -2,64 1,01
2013Q4 6,16 17,65 7,36% -3,56 0,97

Looking at the variables which define the index, the House’s prices continues falling, as well as the weights of the construction on the GDP. However, it seems that the monthly rents are more or less stable since two years ago, which produces a continuous improving of the returns of the hypothetical investment. Actually, the PER variable lies already quite below of its equilibrium, meaning that rent a flat in Spain becomes every day more expensive.  Or, looking at the opposite side, the buy-lo-let residential property becomes each quarter a more  lucrative investment.

International Overview

On the other hand, as regard the Swiss market, the UBS’ report  alerts of the risk of a bubble. In fact, it’s the second time since the UBS Swiss index was launched that it exceeds the barrier of 1,2 and comes into the “Risk zone” following an upward trend. We will see on the upcoming quarters how it continues.