Some say that there will only be a recovery when the pool of 1.6 million vacant unsold properties have been bought up but at current buying rates it will take at least seven years before all the supply of unsold properties have been bought up. The property boom started in 1996 and ended in 2007 which makes it eleven years. The boom went bust in 2007 and it will take eleven years from 2007 in order to unwind the boom and return the housing market back to normal which means that by the year 2018, which is six years away, you can expect to see the bottom in house prices to have been reached, or maybe even sooner when the inevitable happens and Spain drops out of the Euro which is expected to take place sometime in the next three to four years.
An alternative way of looking at it is that because house prices rose by 300% during the boom then the bottom won’t be reached until these gains have been reversed completely which means that house prices will have to fall by 75% from peak to trough to return property prices back to what they were before the start of the boom which means that only until there has been a 75% fall in house prices will the bottom in house prices have been reached. So far house prices in general have fallen by 50% but it will require a further 50% reduction in prices before we get an overall reduction of 75% from peak to trough which will just about bring prices back to sensible levels but whenever there is a crash the market undershoots its long term equilibrium in the short term before recovering and so you can expect to see falls of as much as 95% in house prices when Spain drops out of the Euro.