May 2005 news review

A recent comment in the Spanish Property Insight forum suggested that France trumps Spain as a place to buy property. Reasons given included the number of British lager louts in Spain, the cowboys in the property business, over-development and a feeble Spanish culture compared to France’s ‘sense of national pride and identity’.

No doubt many people thinking of buying abroad ask themselves ‘France of Spain?. Some may arrive at broadly the same conclusion, though the ‘feeble Spanish culture’ claim is in maverick territory. But whilst France is a lovely country that will always appeal to some buyers more than Spain, I think in the long-term the smart money should be on Spain. The climate is better, the welcome warmer, and whilst the fish ‘n chips brigade are here in large numbers they stick to certain areas that you can easily avoid in a lifetime in Spain. Their presence also reflects the fact that Spain is more popular, tolerant and cheaper than France. Over-development is a problem in some areas but there are signs that it is starting to be tackled, and if you approach buying in the right way, using a good, independent lawyer, you have little to fear from the cowboys.



A good, independent lawyer is ‘mission critical’ to a successful purchase. + more


Official figures overstate property price increases say developers

The Association of Developers and Constructors of Spain (APCE) has suggested that official figures published by the government significantly overstate property price increases in Spain. Whilst Government figures show prices rising by 18.1% in 2002, 17.6% in 2003 and 17.4% in 2004, Guillermo Chicote – head of APCE – believes that prices have actually been rising by around 10% over this period.

Every quarter the government publishes figures on the changes in Spanish property prices by region. The government bases its figures on data received from official appraisal companies that value properties on behalf of mortgage lenders. 80% loan-to-value policies in Spain mean that many buyers need an inflated valuation in order to borrow 100% or more of the purchase price, and appraisal companies regularly oblige by overvaluing properties. This practise allows mortgage lenders to lend more than 80% without appearing to do so, and buyers to purchase property with little or no equity capital. This explains why the figures published by both appraisal companies and the government overstate the true extent of property price increases in Spain.

In January 2005 Ignacio Navas – the spokesman of the organisation of Spanish Notaries organisation – also brought up this issue saying, “There are no reliable statistics for the property market in Spain. The figures provide by the appraisal companies can’t be trusted because these companies overstate property prices to justify larger mortgages not only for buying houses but also to finance general consumption”. Spanish Property Insight made precisely this point in its December 2004 news bulletin.

Mortgage defaults in Spain at all time low

Mortgage defaults in Spain dropped by 6.4% to 0.42% during 2004 – an all time low. This shows that despite the recent increase in Spanish property prices, the ability to meet mortgage repayments remains stronger than ever. This situation is largely due to low interest rates, which by Spanish standards are also at historical lows, coupled with increasing employment and economic growth in Spain.

Madrid’s developers forecast 12% increase in prices for 2005

Madrid’s Association of Property Developers (Asprima) forecasts that Spanish property prices will increase by 12% during 2005, down from the 17.4% recorded by the Spanish government in 2004. Asprima also forecasts 625,000 housing starts in 2005, down from 700,000 in 2004. Looking further ahead the association forecasts price increases falling to 9% in 2006. The increasing cost of land, which rose by 40% in 2002 and 2003, is identified as the key driver of property price increase, both past and forecast.

New report reveals wide spread in property prices between Spanish cities

A new report by Tecnitasa – an appraisal company – comparing average property prices in Spain’s main cities, reveals that property prices on Calle Serrano in Madrid (8,500 Euros / m2) are 2,745% more expensive than prices in Jerez de la Frontera (330 Euros / m2), on the Costa de la Luz in the province of Cádiz, Andalusia.

Average Spanish property prices by city in Euros / m2
Source: TecniTasa
Madrid (Calle Serrano)8,500
San Sebastián7,570
Bilbao (Abandoibarra – Gran Via)7,300
Barcelona (Paseo de Gracía)7,200
Marbella Puerto Banús6,650
Santander (Playa del Sardinero)6,300
Valencia (Ciudad de las Ciencias)4,600
La Coruña (central district)3,600
Sevilla (Dos Hermanas) y Jaén600
Cuenca (outer rim)580
Valencia (Torrent)540
Jerez de la Frontera (Cádiz)330


BBVA expects interest rates to rise to 3.25% by the end of 2006

BBVA – one of Spain’s biggest banks – forecasts that Euro-zone interest rates will rise to 3.25% by the end of 2006, up from 2% today. This would represent a 62.5% increase in the base rate used to calculate Spanish mortgage repayments. On the other hand the bank does not expect interest rates to start rising until the beginning of 2006.

Mortgages in Spain 26% cheaper than European average

According to Amado Franco – president of the Spanish saving’s bank Ibercaja – mortgages in Spain are 26% cheaper than the European average, whilst interest-bearing bank accounts in Spain pay out 24% more than the European average. In Franco’s opinion these figures demonstrate the competitiveness of the Spanish banking system.

Spanish families now spend more on housing than food

Spanish families now spend more on housing than food, according to a new report by Caixa Catalunya – one of Spain’s leading savings banks. Whereas in 1990 the average Spanish family spent 21.2% of the family budget on housing and 24.6% on food, by 2000 housing was eating up 28.6% of the family budget, compared to 18.1% for food. The report reveals that both the richest and the poorest segments of Spanish society spend the greatest proportion of the family budget on housing compared to food. Spanish families with incomes of less than 390 Euros per month spend 45.3% of their budget on housing and 22% on food. Families with incomes of more than 3,900 Euros per month spend 32.9% on housing and 10.3% on food.

Vendors prepared to accept up to 20% less

The Spanish newspaper El Pais reports that properties are taking longer to sell than in 2004, and that 20% of vendors are dropping asking prices (typically between 6,000 and 12,000 Euros – the equivalent of 1 to 2 million Pesetas). Whereas in 2004 buyers might only have been able to negotiate a reduction in price of 5 to 10%, this year buyers appear to be able to beat the vendor down by as much as 20%. Commenting on the slowdown in the market, Jaime Cabero – head of Madrid’s association of real estate agents – explains that “the rhythm of sales in recent years has not been normal”. Despite the fall in the number and speed of transactions property prices are still expected to increase by 10% this year.

Euro-zone property price increases highest since early ’90s says ECB

Property price increases throughout the Euro-zone are at their highest since the early ’90s according to the ECB’s latest monthly bulletin. The bank estimates that residential property prices in the Euro-zone increased by 7.2% in 2004, following a 7% rise in 2003.

Property price inflation will take 4 years to drop to levels of general inflation

A new report by Analistas Financieros Internacionales (AFI) and Grupo Planner forecasts that property price inflation will take 4 years to fall to the level of general inflation in Spain. The report concludes that 2005 will mark the turning point in the property price cycle, with Spanish property inflation falling to 12.2% this year from 17.4% in 2004. General inflation in Spain presently stands at around 3.5%. The report also forecasts average annual demand for housing in Spain of 484,000 properties per year until 2010, of which 300,000 will be principal homes and the rest holiday homes.

Property prices increased by 4 times more than wages

According to a report by the Association of Banks, Savings Banks and Insurance companies (ADICAE CV), Spanish property prices have risen 4 times more than wages during the last 8 years. Whilst Spanish property prices have increased by 108% over this period, incomes have only risen by 27%. The report finds that Spaniards have reached the limit of their ability to finance property purchases and that household borrowing has reached 95% of disposable income.

© Mark Stucklin (Spanish Property Insight)



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About Mark Stücklin

Mark Stücklin is a Barcelona-based property market analyst and consultant, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008). He can be reached by email on