Price of new housing in Spain falls

Prices for New Housing Drops for the first time in 15 years

The slowdown in the property market in Spain has led to a situation where house prices have fallen by 1.2% during the first 6 months of 2008. This is the first fall in prices in 15 years according to the Sociedad de Tasación which has been carrying out studies of the housing market in Spain for 25 years.

The report published by this organization which values properties and is used as a reference for what is happening in the housing sector shows that for the first semester of 2008 that prices have fallen in the capitals of 35 provinces. It also finds that prices have risen in just 11 provinces, although not above inflation, and that prices have stayed the same in 4 provinces.

According to this latest study the price of new housing in the capitals of provinces closed at the end of June at an average of 2,781 euros per square metre which is 1.2% less than the previous semester when prices rose by 1.1%. In the first semester of 2007 prices rose by 4%.

Most expensive real estate in Spain

The most expensive city to buy a flat in is still Barcelona, where a square metre costs 4,500 euros despite a 0.4% drop in prices there followed closely by San Sebastian where prices have dropped by 0.6% and a square metre costs 4,035 euros. Prices in the Spanish capital, Madrid, have fallen by 1.4% where a square metre costs 3,916 euros.

Cheapest place to buy a house in Spain
On the other hand the cheapest prices can be found in Pontevedra where a square metre costs 1,848 euros, Badajoz where a square metre costs 1,525 euros and
Lugo where a square metre costs 1,547 euros.

The Sociedad de Tasación concludes that these figures show a significant slowdown in the Spanish housing market above all in tourist areas and areas on the outskirts of cities where there is a large stock of unsold new housing. It also points out that according to the Spanish National Institute for Statistics the number of flats started and finished from January to March has gone down compared to the same period last year.

It also concludes that the considerable slowdown in the Spanish property market is due to the difficulties in finding credit, high prices and recent rises in the Euribor.

Property surplus in Spain

Report forecasts a surplus of over a million properties in Spain

A report compiled by the consultancy agency Forcadell together with the University of Barcelona (UB) presented last week by the expert and professor Gonzalo Bernardos, states that ‘practically nobody is selling anything’ and stresses that there is no lack of properties in Spain. In fact, according to the report by the end of this year there will be almost a million surplus properties for sale.

Forcadell believes that the steps that need to be taken are primarily to assess the real situation. It also believes that possible solutions lie in not trying to stimulate the production of more flats but to allow for a cooling off period in which a large part of the actual stock could be absorbed into the property market.

Forcadell proposes a packet of measures. Firstly, the opening of a period of ‘indefinite’ sales in the prices of properties something which would imply a substantial reduction in current prices and would be uniform for each city.

It has also suggested that the special promotions included in the campaign of sales should be financed under special conditions. According to the consultancy agency the cost of the subsidy in the interest rate, which would be guaranteed over a period of five years at 2.5% and which would also include loans of up to 100% the value of the property should be shared by property developers, banks and building societies.

In recent reports Forcadell gave clear warnings over the difficulties the property sector was facing. According to its forecasts the price of property in Spain will go down on average by 20% between 2007 – 2009, a fall caused principally by the excess number of available properties and a significant drop in demand for properties. In his opinion, speculators and investors will not get good results which will lead many of them pull out of the property market all together and invest there money elsewhere.

Property developers in Spain confirm drop in sale of homes

The president of the Association of Spanish Constructors and Promoters (APCE), Guillermo Chicote, yesterday confirmed that the sale of flats went down by up to 60% between September and April and that there is now a surplus of around 500,000 unsold properties. Gerardo Díaz Ferrán, from the CEOE also warned that if the government did not adopt ‘brave and aggressive’ measures to alleviate the economic slowdown in Spain there would be half a million more unemployed by the end of the year.
According to Chicote, the situation will get worse in 2009 and that instead of 300,000 unemployed workers in the construction sector this number would rise to 500,000.

The APCE announced that if more properties were not sold then the ‘Treasury would not have money coming in and that it would have to pay out more money in subsidies to the unemployed’. Chicote also suggested some ways of increasing the demand for housing by creating a new category that fell between subsidised state housing and private housing with a fixed price.

Promoters have also asked the government to take a number of financial steps within the space of 3 years one of which would be to update the tax rebate for buying a property set in 1998 at 9,015 euros.

With respect to prices, APCE predicts that prices will continue to increase slightly below the rate of inflation. According to the latest official figures published by the Housing Ministry the price of flats went up only by 4% in this last quarter compared to an inflation rate of 4.5%.

Overpriced property in Spain

The IMF calculates that property is overvalued by 20 percent in Spain

The International Monetary Fund (IMF) warned yesterday that a drop in the price of properties and investment in the residential property sector in particular could lead to recession. Although this is not the case in Spain yet the IMF has indicated that it believes properties to be overvalued in Spain by around 20%, a situation which is unsustainable. It also warned that Spain’s economy is one of the most vulnerable if there is a further weakening in the property sector.

A chief economist for the IMF, Simon Johnson, believes that innovation in the financial sector that has helped many people to purchase their own home over the last two decades has also contributed to making advanced economies vulnerable to weaknesses in the property sector.

Ireland, the United Kingdom, Holland and France are also in a vulnerable position due to weaknesses in their property markets at present. Spain is also included in this group. Firstly residential investment is the second highest among advanced economies and constitutes 9% of GDP in Spain although at present this figure appears to be stable according to the IMF.

Ireland is the only other country with a higher figure than Spain’s with 12% of its GDP dependent on investment in the residential property sector. The second factor is the importance of the construction sector in the Spanish economy. Thirdly, the soaring price of properties in Spain over recent years is also another significant factor. According to Roberto Cardarelli, an economist for the IMF, prices in Spain are overvalued by between 15 to 20% which is twice as much as in the US. He also said that a weakening in this sector would have serious repercussions for the Spanish economy because it was much more vulnerable than any other advanced economy.

In the report due to be presented in Washington later this month the IMF also indicated that a weakening in the property sector would affect any economy that was experiencing a period of economic slowdown and that the effects would take anywhere between two to six months before they became apparent.

Monetary policy could help lessen the negative effects mentioned above which is why the IMF believes that central banks must pay more attention to developments in the property market and respond in an ‘energetic’ way to fluctuations in prices in this sector.

Next week the IMF will present its report on the risks to the financial sector and on Wednesday it will outline its forecast on economic growth. Yesterday Johnson spoke about ‘stagnantion in the US economy and ‘slow growth in Europe’. He also said that the price of property should be considered as one of the many key factors that influence economic prospects.

Property prices in Spain rising below the international average

According to a recent study carried out by The Economist, flat prices in Spain are rising below the international average rate. The study undertaken by the magazine looked at the evolution of prices in the second quarter of 2007 and included 20 countries from all over the world.

The Economist found that in the second quarter this year property prices in Spain rose by just 5.8% compared to 6.66% which was the average for the countries included in the study. Just one year earlier property prices rose by 10.8% in Spain compared to an international average of 8.4%.

According to the Economist, between April and June this year Spain fell behind Singapore (21.1%), South Africa (14.5%), New Zealand (13.3%), Hong Kong (10.6%), Sweden (9.9%), Great Britain (9.6%), Australia (9.2%), France (8.1%), China (7.5%), Denmark (7.4%) and Canada (7.3%).

Those countries that saw property price rises lower than the Spanish rate of 5.8% were Belgium (5.7%), Italy (5.6%), Holland (5.2%) and Switzerland (1.4%) while four countries in the study saw property prices drop: Ireland (-0.7%), Japan (-1.6%), the US (-3.2%) and Germany (-3.4%).

However, although property prices are rising at a slower rate in Spain they are still rising above the rate of inflation and it doesn’t affect the rate of growth in prices that the property market in Spain has experienced over the last decade which leaves it fourth in the Economist’s ranking.

Spanish property prices rose by 189% between 1997 and 2007. Other European countires which also experienced property booms during the same period were Irleand with a rise of 251% and Great Britain with a rise of 211% both of which are almost 69% more than price rises in the US.
This brings concerns that the current financial crisis in the US could spread to Europe. The crisis in the US is based on the fact that US banks conceded ‘subprime’ mortgages to people with little or no credit rating with very low interest rates to start off with but which later rose abruptly. The Economist hasn’t ruled out the possibility of a similar crisis happening in European countries.

Fall in property prices in Madrid and Barcelona

Spanish real estate website Idealista has confirmed that over the last three months while two thirds of property owners who wish to sell their properties have refused to budge, prices for one out of every three properties for sale on its website in Madrid and Barcelona have been lowered by nearly 5%.

In fact official figures for the second quarter this year indicate that property prices have fallen for the first time in many years in six provinces (Valladolid, Guadalajara, Madrid, Navarra, La Rioja and Soria).

Two weeks ago, the Ministry for Housing said that the average price of a property had increased by only 1.5% in the second quarter of this year, a figure which is below the official rate of inflation. Figures taken from idealista.com are heading in the same direction. So far it has only looked at the property markets in Madrid and Barcelona. Nevertheless the analysis of around 26.000 used properties for sale on the website shows a clear tendency in both cities of property owners to lower their asking prices when trying to sell their property. Figures for each city are very similar. The study found that 33% of property owners in Madrid lowered their asking price by 4.8% while in Barcelona 35% of lowered their prices by 5.9%.

The continuing rise of the Euríbor interest rate which last month reached 4.564% its highest rate since February 2001 together with the continuous rise in property prices which rose by more than 18% in 2003 has meant that it has taken much longer for properties to sell.

The authors of the report say that trends towards price negotiation seen in the Madrid and Barcelona property markets are applicable to the rest of the country.

Decline in house sales

House sales fall 11.5% in Spain

The number of house sales in the first quarter of this year fell compared to the same period last year according to figures taken from the Land Register. Over the last 12 months there have been 893,000 houses or flats purchased which mean that house sales have fallen 11.5% in just one year.

The drop in house sales has been more acute for new properties and has fallen almost 16% while sales of used housing have fallen by only 8%. These figures confirm the slow down in the property market.

In the first quarter of 2007 232,000 houses or flats were purchased according to the Land Register. However, this figure is almost 23,000 less compared to the same period last year which works out at 9% less.

Figures vary according to different parts of Spain. Over the last 12 months house sales dropped by 20% in Aragón and by 18% in Galicia. In Catalunya there was a drop of 15%, almost 14% in Madrid, 13% in Valencia and 7.5% In Andalucia.
Out of all house sales in Spain for the first quarter of this year 58% were for used housing while 42% was for new housing.

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.

Sharp fall in real estate share value in Spain

Following sharp rises in property prices over recent years Estate Agents suffered a sudden fall in value on the Spanish stock market yesterday.

This collapse in value brought back memories of the damage suffered by internet companies when the technology bubble finally burst. Many analysts believe that property prices have blown up far out of proportion partly due to property speculation. Yesterday the Valencian Estate Agent, Astroc, suffered a spectacular fall in value on the stock market. However, what is not yet clear is whether this precedes a crisis in the housing market or is just an isolated incident.

The evolution of the small estate agent, Inbesòs, showed how important speculation is. Following a fall of 26% at the opening of the market it then shot up by 37% giving respite to some nervous investors. Infact Inbesòs has risen by 700% in three years and it is not even one of the most profitable in the sector.

The government played down the importance of what happened in yesterday’s stock market saying that some sectors had experienced excessive growth. It considered that people should not talk of a collapse but that it was a mere correction following historic highs in recent years. It also said that the value of Estate Agents continued to be higher than 12 months ago although some companies had grown out of proportion to their value which gave rise to the idea of a crash in this sector of the stock market.

The Governor of the Bank of Spain, Miguel Ángel Fernández Ordóñez, denied that the collapse in the value of various companies in the sector could be considered as an indicator of the property bubble bursting. He said that on the stock market rises and falls were never slight.

Fernández Ordóñez repeated that there is a gradual slow down in the property market and that prices were still far from crashing. The Governor of the Bank of Spain reminded the press that property prices grew 7% last year compared to 17% the previous year.

Lowest property prices in Spain

Only ten cities left in Spain where one metre squared costs less than 1000 euros
House and flat prices are nearing their peak, however this peak is very high. There are only a few cities left where you can find a house or flat for less than 1000 euros per square metre and this is only in a few neighbourhoods. According to a report by House valuers (Tecnitasa) these cities are Cuenca, Murcia, Jaén, Melilla, Alicante, Badajoz, Las Palmas, Lugo, Zamora and Jerez de la Frontera. The report covered 61 Spanish cities in total.

However, the cheapest cities influence the figures significantly. In the area called La Paz, in Murcia, prices have risen from 650 to 830 euros per square metre in one year. In the cheapest areas in Jaen, prices have risen from 670 to 850 euros per square metre. Both rises are above 25% in just one year.

On the other hand the highest prices have remained static. In the Paseo de Gràcia in Barcelona a square metre costs 11,000 euros and 10,000 euros in la calle Serrano, in Madrid.

There are 10 cities where the price per square metre has risen above 6000 euros. Apart from Madrid and Barcelona. These cities are San Sebastian, Bilbao, Zaragoza, Marbella, Santander, Oviedo, Sevilla and Gerona amongst others.

However Estate agents have confirmed that the drop in property prices is becoming more and more generalized following the boom during the last few years. In fact two reports published yesterday state that property prices dropped in the first trimester of the year. Second hand houses and flats rose less than 1% in Madrid and Barcelona and prices dropped in many areas of both cities. One report by Expocasa goes a step further and states that property prices dropped during the first trimester in 66 of the 91 cities and towns with more than 25,000 inhabitants.

The cities which have experienced significant drops in prices are Coruña (a 6.8% drop), Valladolid (4.5%) and Cáceres (3.7%), according to Expocasa, while Idealista highlighted a drop in prices in San Fernando de Henares (3.5%) and Esplugues de Llobregat (5.2%).

María Antonia Trujillo, the Minister for Housing yesterday said that the housing sector is stabilizing and going back to figures that were normal 16 years ago. Speaking at a conference organized by one of Spain’s largest unions, UGT, in Cáceres, she said that the government’s objective was for the annual rise in house and flat prices to match the rate of inflation.

Expensive flat in Madrid

The second most expensive flat in EU for sale in Madrid

According to three of the biggest web pages representing British, German and Spanish estate agents Madrid is the city where the second most expensive flat is for sale.
The most expensive flat is in the exclusive London neighbourhood, Chelsea, and is for sale at a price of 8.1 million euros. It has 7 bedrooms, a garden and a swimming pool.

The second most expensive flat in Madrid is for sale at 5.4 million euros. It is 600 m2 and has 5 bedrooms, a 22 metre terrace and a double garage. It is in Calle Almagro near la Castellana in the Chamberí neighbourhood.

In order to find the most expensive flats for sale in Europe a group of estate agents looked at prices in Barcelona, Madrid, Valencia, London, Liverpool, Manchester, Munich, Hamburg and Berlín.

In Spain Barcelona and Valencia are the most expensive cities for luxury flats following Madrid. According to this study the most expensive flat for sale in Germany is in Munich. It is 360 m2 and has 7 bedrooms and a library and costs 3.8 million euros.

Related:
Guide to Madrid
Houses for sale in Madrid

Properties overvalued in Spain

Overvalued real estate prices could condition economic growth in Spain.

A half yearly report on Spain by the Organisation for Economic Development and Cooperation (the OCDE) has predicted a growth in GDP by 3.3% in 2007 and 3.1% in 2008, however it has detected some imbalances: low productivity and the overvaluation of properties in the housing market by as much as 30%. According to the report, if these two issues are not addressed then economic growth will drop to 2% over the following decade.

The report, which was published on Wednesday, has reinforced worries regarding the property market in Spain. The OCDE indicated that property prices in Spain have doubled since 1998. It also noted that while a large number of properties remain empty the possibilities for renting in Spain are limited, something which is bad both for the mobility of the labour force and the unemployment rate. The report said that careful analysis had shown property prices to be overvalued by around 30% something which could result in serious economic imbalances over the long term.

Furthermore, the level of debt that Spanish families are getting into, partly due to high mortgages and rising interest rates, is increasing at an exaggerated rate of 22% according to economists from the OCDE. The report highlights the need for stabilisation in the property market.

The report also stresses the need to properly address the current distortion in the housing market which on the one hand stimulates demand but at the same time makes it more difficult for young people and those on low incomes to get onto the property ladder. According to the report by the OCDE, the solution lies in gradually eliminating some of the measures helping property buyers and creating a balance between the incentives to buy and sell property.

Related:
Property for sale in Spain

Bargain house sales in Spain

Property sector participates in January sales in Spain.

This years sales are to include special property deals too. According to a Cadena Ser article published today, if the price of other goods are reduced for the sales then why not flats – this must have been the thinking in Remax, a chain of estate agent’s which has reduced the price on some of its properties on sale.

The property sale will start next Monday 8th January and end on 31st January and will include 1060 properties with discounts of approximately 4% on the original price. This system was first put into practice last year in just one of Remax’s branches in Santa Pola, Alicante. Its success was such that the branch's sales of flats increased by 30% in January last year.

This year 68 branches of the same Spanish estate agent all over Spain will participate in the sales. Andalucia has the most offers while Valencia and the Canarias come next in terms of special deals available.

The reduced prices have been approved by the property owners who have agreed to participate in the sales. They have signed an exclusivity contract with the estate agent quoting the original price and the reduced price. In addition these contracts have been inspected by notaries in order to guarantee the reduced price for the buyer.

This campaign also includes garages whose discounts range from 500 to 1000 euros. For flats the discounts range from 1000 to 300,000 euros. The biggest discount is for an estate in Las Palmas, Gran Canaria valued at 1.3 million euros.

According to the president of Remax, this campaign is possible because the Spanish housing market is slowing down. Although prices aren’t falling there has been a slow downward trend in the sale of properties. And property owners who want a quick sale are having to lower their prices in order to achieve one.

Related links:
Houses for sale in Spain

Average mortgage rates in Spain

The length, size and number of mortgage loans in Spain continue to rise.

According to figures released by the Spanish Property Registrars Association yesterday, and inspite of the recent rise in interest rates, property-buyers in Spain are opting for longer loans and the average length of a mortgage in Spain has risen to 26 years and 3 months, that is six months longer then the average stood at the end of 2005.

The average monthly mortgage payment has also risen to 789 euros, 40 euros more than during the last three months of 2005.

And more and more people are taking out morgage loans according to the figures released by the Spanish Mortgage Association yesterday which indicate that during the first term of 2006 business in the loans and mortgage sector rose by 26 percent compared to the same period in 2005.

Average price of property in Spain.

Meanwhile house prices continue to rise, although as predicted the rate has not increased with respect to the previous year. According to the Registrars' report released yesterday, house prices in Spain have risen by 15 percent over the past 12 months which is exactly the same as the previous 12 months. The cost of new housing in Spain rose by 11 percent, considerably less than resales where prices rose by over 19 percent.

The average price of property during the first term of this year was 1,916 euros per sq metre.

Related:
Mortgages in Spain
Spanish bank mortgages for non-residents
Spanish banks

Slowest rise in housing prices for past 4 years.

This weekend Spain's Director General of Arquitecture and Housing Policy announced that in 2005 prices of property in Spain rose by just 12.8 percent, the slowest rise for the past four years.

The regions to experience the highest rises in (15.1 percent) and Castilla la Mancha (14.6 percent), whereas Cantabria, Castilla y Leon and Catalonia registered the lowest growth in the housing market, with rises and just 6.6, 7.5 and 8.8 percent respectively.

Experts expect prices to continue to rise during 2006, but at a gradually slower rate than in the housing boom of the past few years, as national demand slows down, investors turn away from the property market and look towards other forms of investment. And whereas prices are certainly not expected to freeze or fall in the short term, they are expected to rise least in areas with massive supply of new housing development.

Foreign markets will become more and more important to building developers and promoters from now on, especially since building has not slowed down yet, even though prices seem to be doing so.

So while it is a good moment for foreign buyers to find a possible bargain purchase in Spain, as always they are advised to go carefully, not to jump headfirst into a property purchase and to seek legal advice. If you are considering buying a property in a certain area of Spain and want our opinion on the price you are being offered, let us know.

Lowest rise in house prices in Spain since 2002

According to the General Director of Arquitecture and Housing Policy, Rafael Pacheco, the rise in the cost property has risen just 13.4 percent in the last 12 months. This represents the lowest rise for 3 years and, according to Pacheco, is the first clear result of the Spanish government's housing policies.

The General Director also indicated the regions in which house prices have risen most. These are Castilla La Mancha (19.8 percent), Aragon (16.4 percent) and the Valencian Region (16.3 percent). In Andalucía, traditionally one of the most popular destination for non-resident house buyers, the rise in house prices at 13.7 percent is only just above the national average.

The most expensive region as far as the cost of housing is concerned is Madrid (2,719 euros per sq. metre), followed by the Basque Country (2,537 euros), Catalonia (2,037 euros) and the Balearic Islands (2,003 euros). The cheapest regions are Extremadura (864.2 euros per sq. metre), Castilla La Mancha (1,255 euros) and Leon (1,297 euros).

Related
Revaluation of property in Spain per region
Investing in property in Spain
Houses for sale in Spain

House prices in Spain

According to a new report released by the Catalonian Savings Bank (Caixa Catalunya), the price of new houses in Spain will have risen by 16.2 percent by the end of 2005. This means that housing prices have risen at the same rate this year as 2003-2004, contrary to the expectations of some financial analysts at the beginning of the year who predicted a slowing down in the growth rate of Spanish property prices during 2005.

The Caixa's semestral report says that the figure is slightly below the record 16.8 percent growth in housing prices experienced in 2002 in what was a boom year for the property market in Spain.

According to the report, the price per sq. metre of new property in Spain currently stands at 1,777 euros, that is 247 euros more expensive than last year.

The Caixa expects the trend to continue in the short term, despite a marked increase in the number of new houses on the market. 708,000 new housing projects have been undertaken so far this year, compared to 687,000 last year which then was an all-time record. The report also expects the strong demand for new property in Spain experienced in recent years to continue.