2012 could be worst year yet for Spanish housing market warn analysts

Thanks to the Government’s financial reforms this could be the worst year yet for Spanish house prices say leading analysts

The Government’s financial reform will push down house prices more this year than any other since the crisis began forecast analysts like Madrid-based R.R. de Acuña y Asociados and international ratings agency S&P.

R.R. de Acuña y Asociados are forecasting price declines of up to 14pc this year, the biggest fall since the National Institute of Statistics began publishing its current house price index.

S&P are forecasting that up to 25pc of Spanish mortgages will be under water by the end of the year, up from 8pc in 2010.

The reaction of banks to the financial reforms will be one of the main drivers of price falls this year says Fernando Rodríguez de Acuña, a partner at R.R. de Acuña y Asociados. “Banks are preparing themselves for big losses in the real estate sector,” he said, quoted in the Spanish press.

The financial reforms are forcing banks to make bigger write-offs on their property portfolios, which means bigger discounts on the properties they have for sale. That will force private vendors to reduce their prices too.

There has been a recent 30pc surge in the number of vendors dropping their asking prices, reports Idealista.com, a property portal.

It is widely reported in the Spanish press that house prices have already fallen 30pc, though the Minister of the Economy says 35pc.

“We suspect prices have fallen more than 30pc since the peak, though we accept that part of the adjustment has been delayed by lenders who have been accumulating repossessed properties,” says Raj Badiani, and economist at IHS Global Insight.

Another problem, according to Fernando Encinar, head of research at Idealista.com, is that investors don’t believe the values that banks are giving their property portfolios. The suspicion is that banks are overstating the value of their portfolios.



9 thoughts on “2012 could be worst year yet for Spanish housing market warn analysts”

  1. Campbell D Ferguson, FRICS, www.surveyspain.com

    This is perhaps the start of the good news. At last we can see an end to the downward spiral, though it’s some time away and we are not at the foot yet. Everyone has known, but it’s never been formally acknowledged, that the Spanish banks have not valued the property to actual market level. Now they will be forced to do so, either by sale of the property or by having such a quantity of property marketed and sold at low prices that higher valuations cannot be maintained. If they had honestly declared the collapse of assets as it was, in the same way as those banks in Ireland and the UK, yes the short-term loss of face would have been substantial, but the long drawn out damage that is currently being done might not have occurred.

    For private sellers, without the ability to offer mortgages to buyers, the prices will have to fall even more to be competitive. This, plus the costs of purchase and sale, will mean that any buyer of bank property will immediately be in negative equity of 20+ per cent. Only the best properties, by location and facilities, will be bought by occupiers who are not looking for instant capital gain, but are seeking an ideal home for themselves. The other buyers will be speculators who will negotiate with the banks to sell at even lower than their discount prices and be prepared to hold the property for a few years until the world economy drags Europe and Spain upwards and out of its present malaise. Keeping these properties in condition to occupy and paying off the community and local taxes, will be a cost that the speculators may not be prepared to cover until the property is sold, with the result of starving local communities and town halls of current income from these ‘assets’.

  2. Bill Gottfried

    We take a contrarian view with our investor clients and believe this is a good time to come into the Spanish real estate sector. 3-4 years from now, everyone is going to say they wished they got on the real estate investment train in 2012.

  3. Angie

    It seems to me that there is no reliable way of assessing what any property is worth at the moment. Even people who are reducing their asking price are discovering that buyers are thin on the ground.

    A friend of mine has had her property on the market for 3 years and has reduced the asking price (which was less than she paid for it 5 years ago) considerably. She’s had 3 viewings and no offers, not even silly offers.

    Buyers are waiting for the market to bottom out and, at the moment, no-one knows when that will be but all this speculation isn’t helping one bit.

  4. Juan Miguel

    I completely agree at long last the banks are being forced to come out of cloud cuckoo-land. Private sellers have always reflected the true market price which I feel will level-out at a about a 50% decrease.

    The problem then raises the question, will these finally true debts lead Spain into a major debt problem with the Euro?


  5. Paul Whittaker

    That’s a really interesting comment. You seem to imply, forgive me if I am reading more into your words than intended, that no one has any evidence as to when the market will stop moving down.
    I bought a property in 2009 and every year since then I’ve seen reports that the market will improve next year.
    I don’t want to sell my property but I would be interested in hearing what is going to happen to its value in the future.

  6. JohnN

    The banks are sitting on masses of new and second hand properties. Even if they know it, I am pretty sure that they would not want to declare any true and realistic worth to their portfolios.

  7. Campbell D Ferguson, FRICS, www.surveyspain.com

    No Chris. Individuals, banks, countries, etc, all borrowed on the future. Well, the future has arrived and the loans have to be paid back.
    But the individuals can’t do it, so the banks can’t do it, so the countries can’t do it and thus the mess we are in. Only hard work can do it and for that we need working economies. But the stable door is being closed by the banks being required to hold more money centrally against ‘bad times’. Well those times are now so they should be being encouraged to do the opposite. The only way out is by investment of labour and capital or we’ll be in the same mess in 10 years time. Release the funds and have 24 hour ‘work ins’ instead of strikes!

  8. sam

    Lets hope that the estate agents who through their unsavoury methods of selling frighten buyers or dupe them, become some what more professional.
    Lets face the truth the real estate business is run by a majority of crooks, liars, dip sticks and desperados.
    Whats needed is some kind of control over these pygmy minded criminals

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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 ms@spanishpropertyinsight.com.