According to official figures from Spain’s housing ministry, Spanish property prices rose by 4.8% on average in 2007, down from 9.1% in 2006, and way off the high of 18.5% in 2003. If you adjust for inflation, however, Spanish property prices only increased in real terms by 0.6% in 2007.
As you might expect from a country as large and diverse as Spain, there were considerable difference across regions. Nominal real estate prices rose the most in the province of Granada (8.5%) and the region of Murcia (8.1%), and the least in the region of Madrid (1.8%), and Alicante (3.3%).
On a quarterly basis prices fell in nominal terms in Extremadura (-0.3%), Castellón (-0.9%), Cantabria (-1.9%), and Cordoba (-1.9%) during the last quarter of 2007.
If the government’s figures are to be believed, then the Spanish property market is gliding towards a soft landing in which prices converge on the general inflation rate, allowing housing affordability to return to normal levels over a period of years. This is the scenario forecast by many ‘experts’, and the government.
Talking of ‘expert’ forecasts, here are a selection for 2008/2009:
- BBVA (major Spanish bank): prices +1.4% in 2008, -1.9% in 2009, housing investment down 3.5% in 2008, planning approvals down 175,000 to 500,000, and 250,000 jobs lost
- Morgan Stanley: prices -5% in 2008
- Deutsche Bank: prices -2% to -8% in 2008
- Natixis (French bank): prices +2% to +3% in 2008
- Crédit Agricole (French bank): prices -10% over period 2008-2009
- Aguirre y Newman (Spanish real estate consultancy): prices – 10% on average, but down 15% on the Costa del Sol, sales down 50%
Returning to the government’s figures, as I have already said, they are widely suspected of being unreliable. Based on mortgage valuations, they have tended to overstate prices so that banks can lend more. A lack of reliable data is a big problem for Spain, as it makes it difficult to know what is really going on in one of the economy’s most important sectors.
There are other sources of price data to help us build a picture of the market, but they are either based on asking prices, or valuations, and never on actual transaction prices, so true market prices remain a mystery. Nevertheless, they do at least give us more information to work with.
According to Kyero.com – a leading Spanish property portal that publishes a Spanish Property Price Index – asking prices fell by 2% in 2007 to an average price of 245,000 Euros (asking prices are not the same as transaction values, which are likely to be significantly lower in a buyer’s market). But whilst the average asking price for 2-bed properties fell by 8.3% to 198,000 Euros, asking prices for 4-bed properties rose by 3.8% to 357,000 Euros, and by 4.8% to 440,000 Euros for 5-bed properties. Kyero’s figures suggest that detached properties are holding up better than apartments. Kyero’s database of properties is focused on popular coastal areas, so these figures reflect this bias.
Figures from the Spanish property portal idealista.com also point towards falling property prices in 2007. According to Idealista, asking prices fell by 0.3% in Madrid, and 2% in Barcelona – the first annual falls in these markets since Idealista started publishing figures in 2000. Prices did increase slightly in some areas, for example the City of Valencia, but the overall trend was downward.
Lastly, figures published by Sociedad Tasación – one of Spain’s largest appraisal companies – show that average new build prices in Spain’s provincial capitals rose by 5.1% in 2007, down from a rise of 9.8% in 2006. It is difficult to believe that new build prices actually rose by this much in 2007, as it conflicts with other, arguably more reliable sources of information. But this figure does at least show that the market is cooling down, rather than heating up.
All in all, these figures suggest that Spanish real estate prices stagnated or fell slightly in 2007. However, other sources of property market information, such as estate agents and developers, describe an altogether bleaker situation in 2007, so these figures may hide as much as they reveal. In many popular coastal areas where foreigners tend to buy holiday homes, such as the Costa del Sol and the Costa Blanca, agents report that prices have been stagnant or falling for some time, in some cases by 20% or more.