After months of resolute denial that new build property prices might fall, Spain’s developers have done a u-turn, and now concede that prices are already down by 15%.
In a radio interview (Onda Cero) this morning, Manuel Martí, general secretary of Spain’s Association of Constructors and Developers (APCE), said that house prices have fallen “no less than 15%” in recent months, and that “there may be even bigger one-off falls.”
According to Martí, “Promoters reduced new build prices last September, and then again in January.” As a result, the market for new build properties is now full of “great opportunities.”
Since Spain’s property market crisis started last summer, developers have obsessively dismissed any suggestion that they might lower their prices in a futile attempt to head off expectations of lower prices taking hold amongst buyers. This u-turn suggests they realise the battle is lost.
When buyers expect lower prices in future they delay their purchase, causing the market to grind to a halt, and forcing down prices. So buyer expectations can be self fulfilling, especially in an over supplied market like Spain, as developers are acutely aware. By conceding that prices have already fallen significantly, developers want to draw a line under any further falls, and get the market going again.
“The idea has spread that soon we will be giving away flats or that there will be bargains all round,” explained Martí. “This is not going to happen, and until people realise this it’s probable that the market will suffer.”
Given the present severity of Spain’s property market downturn, it is far from certain that developers will be able to turn around buyer expectations with the mere claim that prices have already fallen by 15%.
If buyers expect prices to continue falling, then fall they will, whatever the developers say.