What does the immediate future hold for the Spanish property market? Stagnation or another lurch downwards, according to one industry leader.
“The property market is under observation. Either we have touched bottom, or we are going to fall again.” That was Juan Fernández-Aceytuno, Managing Director of Sociedad de Tasación, one of Spain’s leading appraisal companies, speaking at the launch of stvalora.com, a new online valuation service.
Almost 4 years since property prices peaked, the market is still stuck in what some call a correction. “We are at an impasse, with everyone waiting to see what happens to the market. Few people will dare to say if we have touched bottom or just a bottle neck before falling again,” said Fernández-Aceytuno.
No rebound in property prices
A rebound in prices is the one thing that Fernández-Aceytuno confidently rules out, despite the forthcoming increase in VAT that will put up the price of new homes. If anything he is more worried about a potential increase in interest rates forcing house prices down further.
Fernández-Aceytuno also points out that house prices tend to rise in good times and fall in the bad. “Nobody has a crystal ball when it comes to prices, but at times when disposable incomes and credit have risen, prices have risen, and conversely, when these have fallen, so have prices.” In Spain today incomes are falling, there are more than 4 million unemployed, credit is scarce, and there is no sign of the situation improving anytime soon.
The Spanish property market recovery, when it comes, will be lead by a change of attitude in the sector, argues the boss of Sociedad de Tasación. “What the sector really needs is to regain trust and credibility,” he said, whilst admitting that some companies inflated valuations for mortgages by 15-20% during the boom. With prices down around 20%, that leaves some borrowers sitting on losses of 40%. “That’s what I would call suffering a bubble.”