Spanish property market Q3 2005

Average Spanish property prices are still rising sharply, at least according to the figures provided by the Spanish Ministry of Housing. However there are signs of the wind leaving the market’s sail.

The latest figures from the Spanish Ministry of Housing show that average Spanish property prices for unregulated property (excluding social housing) increased by 1.6% in the 3rd quarter of the year, taking the average price of property up to 1,781.50 Euros per square meter. This latest increase means that Spanish property is now 13.4% more expensive than it was a year earlier.

After the latest increases prices have now risen for 27 consecutive quarters – the longest series of increases since records began. The last time prices actually fell was in the final quarter of 1998, almost 7 years ago. No other European country can match such an impressive bull run for property prices.

Despite these impressive growth figures there are also some welcome signs that the Spanish property market is beginning to cool. The 1.6% quarterly increase in the 3rd quarter was the lowest quarterly increase in almost 4 years, since the last quarter of 2001. Likewise the 13.4% rate of annual property inflation was the lowest since the beginning of 2002, not long after annual Spanish property inflation first hit double figures. The latest figures confirm that the growth in property prices is on a clear but gradual downward trend, exactly what the Government wants and the economy needs.

By Autonomous region quarterly price increases were highest in Galicia (5.35%), Asturias (3.08%), Catalonia (2.23%), Valencia (1.98%), Andalusia (1.9%) and the Balearics (1.73), all of which had quarterly price increases above the national average. Below the national average were Murcia (1.4%), Extremadura (1.9%), the Canaries (-0.19%) and Cantabria (-3.61%).

By province Pontevedra in Galicia was the best performer with 6.36% in the last quarter. On the whole the other best performing provinces were in the Meseta – central Spain where the Brits don’t buy in significant numbers. Of the provinces that do attract British buyers, the next best was Almeria (3.03%), followed by Girona / Costa Brava (2.56%) and Alicante / Costa Blanca (2.07%). Málaga, home of the Costs del Sol, had a very disappointing quarter with prices up by only 0.87%, well below the national average and one of the worst coastal performances in all Spain. Only Tarragona (0.10) and Tenerife in the Canaries (-2.14%) did worse.

Looking at price developments over 12 months, the most spectacular increase was in Albacete (31.9%), an inland province of Castilla La Mancha where very few Brits visit, let alone buy. The Valencian Region, Almeria and Girona / Costa Brava did well with price increases of around 16%, followed by Asturias (13.6%), Galicia (13.52%), The Balearics (13.25%) and Murcia (12.81%). The worst performing region in all of Spain over this time frame was Málaga and the Costa del Sol, with prices up by only 0.38%. This is well below consumer price inflation of 3.7%, which means that the real price of property on the Costa del Sol has fallen by over 3% in the last 12 months, always according to the Government figures.

News of stagnant of falling property prices on the Costa del Sol will not surprise any of the estate agents working in the region. If anything the government’s figures significantly understate the problems that Andalusia (Costa del Sol), and to a lesser extent Valencia (Costa Blanca) and Murcia (Costa Cálida) are suffering at present. After several years of dramatic construction increases there are now too many properties chasing too few buyers, whilst distressed off-plan speculators who bought in 2002 and 2003 are depressing prices by having to sell under pressure. Sales to foreigners in some of these coastal regions are now down by between 40% and 60% compared to 2003, though this only means a drop to the more ‘normal’ level of sales in 2001. Prices may continue to fall gently in coastal areas where the British buy, though no one expects the market to collapse whilst interest rates remain so low and the demand from Spaniards continues to support the market. Over the long-term the market fundamentals for regions like the Costa del Sol are excellent.

© Mark Stucklin (Spanish Property Insight)

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