Spanish real estate market: Expectations 2007

House prices expected to rise by 3% in 2007

According to a study by Asprima, the Association of Madrid Property Developers property prices will rise by 3% 2007 followed by stagnation in prices in 2008 and then a rise of 1% in 2009.

In a report presented on the first day of a Real Estate conference in Madrid Asprima foresees a drop in demand for properties of around 15 – 20% which will lead to a situation similar to the UK, Australia and the US where the housing market went through a boom but has recently remained stagnant partly due to the rise in the cost of borrowing.

Moreover, the report states that the Spanish housing market is a turning point and is moving towards a less favourable situation. However, it also confirmed that once prices have adjusted realistically demand will rise once again.

The president of Asprima, José Manuel Galindo, suggested that the Spanish property market is undergoing a process of normalization with prices rising less and less production. He blamed the recent rises in interest rates. Despite this he still considers that the demand for housing will remain high over the following 6 or 7 years.

Furthermore also José Manuel Galindo referred to the 4 million immigrants who have already moved to Spain which could result in a demand for more than 100,000 new properties per year.

Falling housing prices in Spain

Morgan Stanley predicts falling property prices in Spain

According to a report by the American investment bank, Morgan Stanley, property prices could fall by up to 5% in 2008 followed by a stabilizing period if demand for new housing only falls moderately. This fall in property prices could continue in 2009 and 2010 if the drop in demand for new housing becomes more intense.

The report by Morgan Stanley suggests three scenarios each of which depends on the evolution of the demand for housing and activity in the sector. In the first scenario the demand for new housing drops to 475,000 as oppose to 600,000 which is the figure at the moment – this would cause a drop of 40% in the activity of the housing construction sector by 2009. The number of properties indicated would be 400,000. If this were the case property prices would fall by 5% and then remain stable over the next few years.

The second scenario which is more optimistic is that housing demand remains at present levels (600,000). In this case activity in the housing construction industry would fall by 20% in 2009 but prices would continue to rise but not more than 5%.
In the last scenario demand for new housing falls to 350,000, a higher rate than in the first scenario, which would result in a 70% fall in activity in the construction industry in 2009. In this case prices would fall by 5% per year from 2008 to 2010.

This last scenario implies a sharp fall from which the housing building sector would take a decade to recover from and would be similar to the situation in Germany at the end of the 90’s when reunification brought about an end to the housing boom there.

New land law for Spain

Zapatero promises new land law will fight corruption

This week the Spanish president, José Luis Rodríguez Zapatero, assured congress that the new land law will fight against corruption and speculation. He said that town halls and local government had a pivotal part to play in its application.

During the final debate in congress Zapatero said that the conditions under which urban development had taken place would change although he added that would be difficult to put right mistakes made in the past.

He said that the law was aimed at stopping property prices, which in recent years have grown disproportionately despite the fact that the housing market has begun to slow down.

The President highlighted the support for the new land law in parliament and said that the period in which the number of state subsidised housing had decreased would be corrected, the landscape and the environment would be protected and corruption would be confronted.

During this speech in congress Zapatero spoke a great deal about measures against speculation and corruption included in the land law. He underlined the need for transparency and control over urban development and guaranteed to stamp out any corruption in the public sector.

Zapatero said that the new law would show who benefited from decisions taken in town halls and gave more power to public meetings.

He also assured that the law would promote sustainable urban development and put a stop to the idea that any area could be urbanised. He also spoke of a new system of evaluation the value of land. He said the law protected individuals and spoke of citizens not property owners.

His speech was greeted by a long ovation in congress.