House prices will fall for 2 more years if past is any guide

Spanish house prices are going to continue falling for 2 years before turning up again, if the past is anything to go by (charts).

There are some fascinating charts in the Bank of Spain’s latest monthly economic bulletin, published today. They illustrate the drama of the Spanish property crash, and give us a hypothesis of where house prices might go from here.

First of all, a couple of charts showing how the supply of new homes outstripped demand for most of the last decade (left-hand chart), leading to today’s glut, which the bank estimates at somewhere between 700,000 and 1,200,000 homes (right-hand chart).

Now comes a map showing where the glut is concentrated, measured as a percentage of the local housing stock. The biggest glut is to be found in The Valencian Community, Murcia and Cantabria (all in blue), where the glut is over 6% of the housing stock. Andalucia is in the second group with a glut of 3.6pc of the housing stock.

Turning to house prices, the next chart on the left shows how official house prices have fallen back to where they were around 2005, which is not to say they won’t fall further (in reality, official figures belie the true extent of the crash – prices have fallen significantly more than they suggest).

The chart on the right is the one I find most interesting. It compares the price evolution today to previous property slumps (1979 & 1991). In both previous cases prices fell for about 4&1/2 years before bottoming out. So if the past is anything to go buy, prices today will continue sliding for another 2 years, and could fall another 10pc if this turns out to be a repeat of 1979.

And finally, a map showing peak-to-present price falls by province, all according to official figures, of course. Biggest falls marked in blue, lowest falls in yellow. Most of the provinces where foreigners tend to buy holiday homes – the islands, Malaga, Almeria, Murcia, and Alicante – are in blue, with price falls above 15pc.

The biggest decline of all goes to Malaga, home of the Costa del Sol, down 20pc sine the peak.

Read full BOS report (in Spanish) > Present Situation of the Adjustment in Residential Investment in Spain and BOS Economic Bulletins Index



4 thoughts on “House prices will fall for 2 more years if past is any guide”

  1. adiep

    Did the BoS actually suggest prices will fall for another two years, or is that your take on the numbers?

    Its very significant is they did state that prices will fall. It will have the effect of pushing prices further south and the BoS wouldnt be ignorant of that effect. So should we take it that the BoS are trying to push down house prices?

  2. Profile photo of Mark

    I’ve changed the title from ‘….suggests BOS’ to ‘….if the past is any guide’.

    Your comment made me realise that the title could be misleading. The BOS said no such thing, it was my take on the numbers.

  3. barry_n

    Great blog and that comparison to previous falls is remarkable.

    However, after skimming the report via my admittedly very shaky Spanish I’m wondering how comparable this period is to earlier price drops. One chart in the report (not shown in your blog) seems to show that the investment in property only fell in real terms by about 10% in 1991-5, but this time has dropped off by 40% already and still falling.

    Have I interpreted this correctly? If so, can we really expect this time round to have the same pattern moving forward?

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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