Average Spanish property prices rose by 0.4% over 12 months to the end of September, but fell by 1.3% in the third quarter, according to the latest figures from the Ministry of Housing.

Taking into account consumer price inflation, which stood at 4.5% in September, the real cost of housing has fallen by 4.1% over the last 12 months.

Newly built property prices rose by 1.7% over 12 months, but fell by 0.8% in the quarter. Resale or ‘second hand’ property, which the Ministry of Housing defines as more than 2 years old, fell by 0.3% over 12 months, and by 1.7% in the quarter.

On a yearly basis, average prices rose by as much as 5.9% in the Andalucian province of Huelva, home to the Costa de la Luz, and by 4.9% in the province of Valencia, in the Valencian Region. Average prices also rose in Galicia (+3.7%), Barcelona (+3.5%), Teruel (+3.5%), Almeria (+3.3%), Tarragona (+3.3%), Cadiz (+2.8%), Seville (+2%), the Balearics (+1.7%), Pontevedra (+1.2%), Girona (+1.2%), Asturias (+1.1%), and Granada (+0.5%).

Average prices fell in all other regions, the most in Madrid (-3.7%), Cantabria (-3.0%), Las Palmas (-2.5%), Tenerife (-1.7%), Castellon (-1.5%), Alicante (-1.5%), Malaga (-0.7%), Cordoba (-0.5%), Murcia (-0.5%), and Extremadura (-0.4%).

The problem is, few people actually believe the Ministry of Housing’s figures, which show average Spanish property prices still rising in nominal terms in the middle of a property market crash. Countries with more reliable housing market statistics, such as the US, the UK and Ireland, all have property prices falling by double digits, and are probably a better guide to the true situation in Spain. It is fair to assume that Spanish property prices are down by a similar amount, and by as much as 20% in coastal areas full of holiday homes.

If the Ministry of Housing’s figures still look wildly optimistic, new data from Tinsa, one of Spain’s leading appraisal companies, looks slightly more credible. According to Tinsa, Spanish property prices fell by 4.9% over 12 months to the end of September, and by 5.9% in the first 9 months of 2008. As with the government’s figures, resale prices fell more than newly built prices, probably because private vendors have more room for manoeuvre on price than developers.

According to Tinsa, 75,000 new properties were sold in the second quarter of the year, the equivalent of 41% of the number of homes finished in the period, which drove up the inventory of new homes to 680,000.

Tinsa estimates there will no more than 300,000 transactions in all 2008, implying that the stock of unsold new homes will rise to 930,000 by year end.

Tinsa expects the inventory of new homes to keep rising into 2009, as construction on current housing developments finishes, and that it will take at least 2 years for the market to digest the housing overhang.