Asking prices could fall by as much as 40% for certain types of resale property argues a new report from the Network of Property Experts (Red de Expertos Inmobiliarios).
A fall in sales activity to “historic lows” of an average of 9,000 resale properties per month lies behind the downward pressure on prices. “Buyers have disappeared from the market,” says the report. “That pushes vendors into dropping their asking prices; if in the past this was done with reductions of 2% to 3%, now the drop is around 30% to 40%.”
Falling sales are explained by “the severe restrictions and tightening up of conditions for mortgage credit,” explains the report.
The recovery in Spain’s housing market won’t begin until next year, and will take 4 years to complete, according to Eduardo Molet, President of Red de Expertos Inmobiliarios.
The report makes the point that some areas will do better than others. Prices will fall more in areas with a lot of new construction and land available for more building than in consolidated areas such as city centres.
Some types of property will also fare better than others. 2-bedroom flats in city centres will enjoy the strongest demand, but “if properties are ground floor or first floor flats, interior facing with a poor distribution, they will not have any demand, which means a major fall in prices.”
At the same time, a new report from the international bank Credit Suisse argues that official data suggesting a 9% fall in Spanish house prices over the last year “do not reflect the real situation in the market”. It said prices are still an unsustainable 7.2 times household earnings. “Many families are spending 60% to 70% of their disposable income paying the mortgage.”
Credit Suisse also chided Spanish banks offering 100% mortgages to dump their repossessions, warning that these properties may still be 50% overvalued, even after the discounts.