House prices have already started rising in some parts of Spain, claims a new report from Caixa Catalunya, one of Spain’s largest savings banks.
House prices are rising in regions where there is no longer a glut of property, say Caixa Catalunya. For example Cantabria (where property on the market is equivalent to just 0.2% of the region’s housing stock), The Basque Country (0.5%), Asturias (0.8%), and La Rioja (0.9%).
Having reduced prices by 15% to 20% in the past, Caixa Catalunya claims to have started raising prices by 3% to 5% on some of its developments in areas where the glut has disappeared and demand has come back to life.
“House and land prices have touched bottom in some cases. The adjustment is almost over, if not already,” said Eduard Mendiluce, head of Caixa Catalunya’s property division Procam. “We are increasing our rate of sales and we are sure that others are doing so too.”
With a bad debt ratio of almost 6%, one of the highest in the business, Caixa Catalunya is one of Spain’s financial institutions with most to gain from an improvement in the housing market.
Still plenty of bad news
Despite jumping on evidence of an improvement in some areas, the report points out there are still some imbalances to deal with.
The glut may have disappeared in some regions, but in others it has hardly been dented. There are between 660,000 and 1,040,000 homes on the market (2.6% to 4.1% of the country’s housing stock), which they expect to decline slightly to between 640,000 and 1,070,000 during the course 2010 (2.5% to 4.2% of housing stock).
How long will it take to mop up the glut nationwide? Caixa Catalunya estimate annual demand at 220,000 homes between now and 2015, almost half the level of 300,000 to 450,000 estimated by developers. At that rate it could take 5 years for the market to digest the glut.
The residential construction business has “adjusted rapidly” to market conditions, says the report. Housing starts have collapsed to 122,000 this year (from around 900,000 in 2006), and investment in residential construction has gone from 8% to 6% of GDP. A million construction sector workers have lost their jobs.