The price of newly built properties in Spain will not fall any further because they have already fallen enough, argues Guillermo Chicote, president of Spain’s Association of Constructors and Developers (APCE). “Don’t anyone expect prices to fall 30% to 40%, because I’ll give them to the bank before that,” said Chicote, speaking at a conference yesterday.
“The developers have already adapted their prices to reality, but even so nothing sells,” Chicote went on to say. “The developers have already adapted their prices to reality, but even so nothing sells,” Chicote went on to say.
Others would argue that if nothing is selling, it’s because prices aren’t yet realistic.
Chicote did concede that the massive liquidity and low interest rates of the boom encouraged “some practices” that were unsustainable. That said, he blamed today’s Spanish property market crash on the credit crunch, rather than excessive prices or over-supply. “We find that vendors can’t sell, despite lowering their price expectations, or that buyers can’t get financing….so the system breaks down,” said Chicote.
To thaw the frozen Spanish property market APCE proposes that the government subsidises mortgage payments to reduce the impact of a rising Euribor, and ensure borrowers pay a fixed rate. “This would cost between 2.5 billion and 2.8 billion Euros over 5 years, but it would help adjust the interest rate,” explained Chicote. In reality this measure would not help improve affordability, but would just keep prices artificially high at the tax payer’s expense, with developers the main beneficiaries.
Chicote warned that if the government does not react, “this situation could last another 3 or 4 years.”
Pedro Pérez, president of the G-14 lobby of leading Spanish developers, also claims that new build Spanish property prices have already fallen significantly. “Prices have fallen by an average of no less than 15%, and by more than 20% on the coast,” said Pérez. “The Spanish economy will not stabilise until the real estate sector stabilises,” he added.
According to the developers, there are 800,000 unsold properties currently on the market, rising to 1 million by year end. Of the unsold inventory of homes, 200,000 to 300,000 of them are newly built, up from 5,000 just 20 months ago.