- March 8, 2013 at 9:57 am #57325
….In the meantime, prices are still very weak and likely to remain that way for most property in Spain for the foreseeable future – exacerbated by the Spanish banks dumping repossessed properties onto the market. Some of these properties are being sold for incredible prices, with some flats, for example, sometimes being priced at 70% off their original values! Certainly, 50% reductions on 2007 prices are extremely common and bear out my oft-repeated assessment that Spanish property has dropped, on average, between 40%-50% in value, since the start of the property crash in early 2008.
Indeed, in some cases the prices of properties have dropped so much that their re-sale price is actually less than the money required to buy a plot and build the same property, from new. Logically, this fact should mean that prices can go no lower. However, the vast excess of property supply over demand in Spain means that even the logic of buying a property that is cheaper than its build cost cannot be relied upon, at least in the short term, to suggest that further price drops will not occur.
Needless to say, the likelihood of average property prices in Spain rising is unlikely until, more or less, all the bargain priced properties in each relevant sector of the market are sold. At that time, prices will stabalise and possibly increase. However, common to most areas is a vast surfeit of (often poor quality and badly located) distress sale priced properties, to the extent that as soon as one is sold another comes on the market – thus defining the low prices in that area, for every other similar property.
In truth, it is unlikely that property prices in Spain, as a whole, will rise until the economic situation within the country is resolved and unemployment (currently at an appalling 26.2%) shows a marked fall. I do not see this occurring for some time to come but anyone interested in the Spanish property market and its prices should keep a wary (and sceptical) eye on the unemployment figures.
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