New house prices will not fall any further say developers

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.

SPI Member Comments

One thought on “New house prices will not fall any further say developers

  • It seems unbelievable that developers are still clinging to the coattails of the property boom of the last 15 years or so. In this period house prices across the board increased above 10% and in some areas, the Costa del Sol for example, 25% wasn’t unheard of. The country as a whole is now struggling with high property prices as a result.
    The attitude of developers stating that they would ‘give property back to the bank’ just underlines how stubborn they can be. This would be detrimental to the market as a whole, leaving properties with banks and making them sell them off to recoup debt is a loss leader as the developer will make NO money and the bank will have to sell the properties well below a low market value.
    If developers had looked to the future regarding ‘over development’ and kept demand rather than oversupply then this situation could have been avoided. Its a buyers market and developers don’t like reducing their profit regardless of the long term consequences!
    Re-sales are also suffering as the high selling price of new property is reflected down the property ladder to older properties. Any vendor who needs to buy after selling must sell high to be able to purchase the replacement property! Catch 22!
    Its a buyers market and bargains can be had but you have to find them and in the next 5 years or so when the world economy stabilises then real estate profit will be realised.

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