The property market plays a crucial role in any economy and with Spain being one of the member countries of the EU, its rapidly growing property market has attracted mixed opinions over the last few months.

This past April, mortgages granted by lending institutions and banks in the country rose 34% year-on-year to mark one of the sharpest spikes in recent years. Banks have continued to demonstrate leniency towards mortgage applicants, but this is perceived by economists as a precarious path to follow given the uncertainty surrounding the growth prospects of the Eurozone economy.

According to reports, the average mortgage value also rose by 9.1% to €123,256, while the amount of capital loaned increased by 46.5% to €3.54 billion. This has continued to push house prices higher this year with several coastal locations witnessing double-digit house price growths.

According to data published by Spain’s Statistical Office, much of this growth is driven by foreign demand, with the British being among the biggest group of buyers. The Belgian and Nordic markets are closely playing catch up with investors keen to invest in one of Europe’s top tourist destinations.

This type of growth has sparked some serious concerns with some already beginning to worry about a repeat of the boom and bust years of 2007 and 2008.

Nonetheless, some analysts have pointed out that since the double-digit housing price increments are limited to the hot locations like the Capital Madrid and Catalunya, there is nothing to worry about. For instance, according to data from Murcia Properties average home prices for the second quarter of 2018, have barely changed since last year with prices increasing by single-digit growth rates.

And according to Murcia Today, the number of sales and purchases finalized this past May increased by 7.7% from the same period last year while mortgages were up about 9%. Statistical data from other similar locations also shows that most places have only registered an average of 6.5% increase in house prices in the country.

However, experts will be looking at the overall growth from last year to April this year and that will be enough to cause some worry among investors. Furthermore, Spanish banks are also under pressure to find places to invest and housing seems to be the preferred candidate right now.

Recent bank reports indicate that low-level bad credit has been rising rapidly in the banking industry in Spain and this has forced them to focus on the housing market whose bad credit fell to just 2.5% in 2017. So, perhaps this explains why banks have been very welcoming to mortgage credit applications. The question that some investors should ask is how far can the banks go with their flexible mortgage approval requirements?

This is like what happened in the period leading to the global financial crises of 2008 to 2009. Lenders became relatively reckless in approving mortgage applications and everyone knows how things unfolded from there on.

Another contributing factor to the rapid growth of the Spanish housing market has been the low mortgage rates. Spanish banks usually base their lending rates on the Euribor rate and according to the latest rates by Banco Bilbao Vizcaya Argentaria S.A. (BBVA), fixed mortgage rates are currently pegged at about 1.85% translating to an APR rate of about 2.612%, which is significantly lower than most places in Europe and North America.

Variable rates, on the other hand, start from about 1.89% in the first year, which is basically derived from the prevailing Euribor rate plus 0.89%.

Under the current circumstances of the Eurozone economy, indications are that the European Central Bank could hike rates in the next few quarters. This will likely result in a higher Euribor rate, which would imply an increase in the variable mortgage rate. So, this could stir up the Spanish property market a bit if it happened, which would raise new questions about the stability of the current housing boom in the country.

But if conditions remain relatively unchanged throughout the year, then companies like Banco Bilbao Vizcaya Argentaria S.A. will continue to enjoy the fruits of the booming housing market.