Spanish property price index down 9.2pc in July

Spanish property price index from Tinsa

Spanish property price index from Tinsa

Spanish property prices fell by 9.2% over 12 months to the end of July, according to the latest Spanish property price index published by Tinsa, one of Spain’s leading appraisal companies.

For what they are worth, the figures represent a slight improvement on the previous 4 months, when prices fell by more than 10% every month. It could be a sign that the slide in prices has bottomed out, though more months will have to pass before we can call a trend.

Once again, coastal areas were the hardest hit, thanks to the concentration of second homes in those areas. Average prices in coastal municipalities fell by 10.9%, and here a clear trend towards smaller price falls appears to be taking shape. Annualised price declines have been getting smaller every month since April, when they reached 13.5%.

The following chart shows the evolution of prices on the coast compared to the national index. It shows how prices on the coast rose much faster during the boom, and then fell more dramatically during the bust. That said, if Tinsa’s figures are correct, coastal property has still outperformed the national index over 8 years since 2001.

tinsa-price-evolution-coast-v-general-july09

Next came big cities and provincial capitals, including Barcelona and Madrid, where prices dropped by 9.7% on average.

House prices in the suburbs fell by 9.6%, and by 8% in The Balearics and The Canaries.

The problem with Tinsa’s figures is that they bear little relation to the real world, where prices are down by at least 20%. Tinsa’s figures are based on subjective valuations, not market prices, so they are not an accurate market metric. They do, however, give one an idea of broad trends.

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4 thoughts on “Spanish property price index down 9.2pc in July”

  1. polaris-world

    These figures are looking more like reality compared to Spanish government official stats which I suspect are hugely distorted due to the time delay effects of off-plan purchases – hence understating the fall in prices.

    It’s well known that valuers overvalued in the boom (there are a large number of owners left high and dry way below their mortgage value) and are under valuing now.

    We see prices having dropped 30% from peak and now, at the lower level, showing signs of stabilisation. I don’t see these figures too out of line with that.

  2. brianc_li

    Mark, I think you are being a bit unfair on Tinsa.

    Yes, they report a 9.2% drop year on year but this is on top of 3.9% in July last year so they are currently reporting closer to 14% overall.

    The figures do, by their very nature, lag what is happening in the real market. That said they are probably the best of the indexes around. I certainly haven´t found anything better.

  3. Profile photo of Mark

    Brian,

    I agree they are probably the best figures around, but that doesn’t make them right.

    Polaris-world (not his/her real name, I hope) says prices are down 30% from peak, which I have no reason to doubt. Tinsa’s figures only show prices down by half that since the peak. They may be the most accurate, but they are still way off target. Which is fine, so long as people are aware of that, which is why I always point it out.

    Mark

  4. ppfandler

    If you believe any figure coming from a Spanish organization you are greatly mistaken.

    It is in their interest to mask the true state of the housing collapse. Most Spaniards own their own home and it is their biggest asset by far. Take that away and the nations’ wealth evaporates.

    The Spanish housing bubble, probably the biggest in the world if you look at valuations methods such as price to rent and price to income it still has a long long way to go.

    The resale market is in a coma to put it mildly. I have seen pisos on the market now for years. The only ones selling are where the owners have dropped the price 30% to 35%. This is where buyers step up. Prices need to fall close to 50% to come back to equilibrium. Or prices don’t go up for years and years!! This is the most likely scenario.

    The whole way of valuing properties by appraisal value is incredibly misleading. It is based on opinion instead of real world transactions. How crazy is that…

    With unemployment at 18%, chronically low salaries and most importantly the shadow banking system shut down (ie. securitizing mortages game over) the banks/cajas are unwilling to lend to new buyers. The bubble has burst and now reality has set in. The housing market is wildly overvalued!

    My guess is that when interest rates rise, which may be a long time coming, there will be a world of hurt in Spain. The ECB has saved the Spanish mortgage holders from massive defaults by lowering their payments by some 30%. But this can not last forever. The ECB will have to raise rates even if the Spanish economy is lagging the rest of Europe.

    When that day comes there will be forced selling like what is happening in the sand states in the US.

    Renting in Spain is far more favorable than buying at the moment. Actually it is cheap. Where in the world can you rent a piso for 1000 euros a month that probably costs 450,000 euros to buy.

    Buyer beware here and buy because you like the place instead of buying to make money…money doesn’t grow on trees anymore here!

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