New build property prices have fallen 20% since the summer, claims Pedro Pérez, President of the G-14 group of Spain’s biggest developers. He also argues that, as a consequence, new build prices have little room left to fall.
Speaking at a conference organised by the notaries’ Housing Observatory, Perez said that no developer will sell below their mortgage costs, generally around 70% to 75% of the value of the promotion.
This contradicts his recent admission that new build Spanish property prices will continue to fall if things stay as they are.
He also failed to point out is that, thanks to Spain’s spectacular property market bust, yesterday’s valuations are no longer relevant. Most developers are deep in negative equity, meaning they have no option but to drop their prices further if they wish to sell.
In the current market, offering a discount of 20% will not be enough to tempt buyers on any but the best, unique developments. Bigger discounts are required in most cases.
So the alternatives facing many developers are 1) sell for less than the mortgage and lose money on every sale, or 2) hand over the development to the bank. 2 may not be an option for developers who are personally liable for their loans.
Official figures from Spain’s Ministry of Housing say that new build prices have only fallen by -2.3%, whilst figures from the National Institute of Statistics have prices still rising by 3.7% at the end of the third quarter last year. Perez’s claims provide more evidence that the official figures are divorced from reality.