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Spanish property market forecasts 2007

2007 Spanish property market forecasts


The OECD expects a “modest correction” in Spanish property prices.

Lombard Street Research Ltd. (London)

Diana Choyleva, an economist at Lombard Street Research Ltd. in London, is bearish, and predicts that the end of the housing boom will also be the end of Spain’s boom. Bloomberg quotes her as saying, “You don’t even need house prices to fall to have a big correction.  All you need is house prices to stop growing. Most likely, things are going to begin to unravel in 2007. We’ve already had a slowdown in house price inflation.”

Spanish Ministry of Finance

Pedro Solbes – Spain’s Minister of Finance – says that Spain’s recent property price increases are “difficult to justify”, and forecasts that property inflation in Spain will fall inline with general inflation (currently 2.4%).

Economist, architect, and Spanish property expert Ricardo Vergés

Property analyst Ricardo Vergés, of Spain’s association of architects, is quoted in the Spanish press as saying; “Property should cost 3 times annual salaries, not 6 or 7, as is the case in Spain today. Vergés thinks that a property crash is more likely than a soft landing.


Standard & Poor’s:

International credit ratings agency Standard & Poor’s forecasts an ‘abrupt’ landing for Spain’s property market in a recent report entitled ‘Storm clouds over European Property Markets’.


Institute of Economic Studies (IEE):

Given Spain’s booming economy, job creation, and increasing number of new households, the Institute of Economic Studies expects the property market to continue growing, and discounts any sudden price correction.


Caixa Catalunya

One of Spain’s largest savings banks forecasts that Spanish property prices will increase by 8% in 2007.


C.B. Richard Ellis

Real estate consultants C.B. Richard Ellis also forecast average property price increases of 8% for 2007, and do not expect property inflation to fall to general inflation levels for a couple of year yet.



One of Spain’s largest banks forecasts that average prices will increase between 3% and 5% in 2007


The Spanish People

A survey of Spaniards by Gallup at the end of 2006 revealed that 29.4% believe property prices will increase considerably in 2007, 6% believe property prices will increase a bit, 15.2% say prices will stabilise, and only 2.3% of Spaniards believe that Spanish property prices will fall a bit or a lot in 2007.


And lastly….

For my part I’m bearish about the wider Spanish property market’s prospects for the next few years. I think that over supply, rising interest rates, scandals, and high prices will all take their toll on demand. A slowdown in the construction sector is inevitable, which could weaken Spanish economic growth significantly, and further reduce demand. As a result I believe the most likely scenario is one in which property prices in many parts of Spain stagnate this year, and stagnate or fall next year. I’ve been saying this for the last 2 years, and have been wrong the last 2 years. Sooner or later I’m going to be right.


I am more optimistic about the market for quality property in coastal areas, and other areas popular with European buyers, where demand is more diversified. I think attractive properties in good areas and on the best developments will hold their value in the short term, and deliver solid returns in the long term. But when it comes to mediocre property in over-developed areas all I can say is there is far too much of it around, and I am not optimistic about it.

© Mark Stucklin (Spanish Property Insight)


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