Residential Spanish property prices fell by 8.9% over 12 months to the end of August, according to the latest Spanish property price index published by Tinsa, one of Spain’s leading appraisal companies. If these figures are accurate then the rate of decline in Spanish property prices has bottomed out at around 10%, as shown in the graph above.

Once again, coastal areas were the hardest hit, thanks to the number of holiday homes on the coast. Average prices in coastal municipalities fell by 10.3%, but there is a clear trend towards prices bottoming out in these areas. Annualised price declines have been getting smaller every month since April, when they reached 13.5%.

Assume Tinsa’s figures are correct, and average prices have fallen 13% in the last 2 years. Does that mean that Spanish property is now good value (looking at the country as a whole, not just the coast)?

Not really. Between August 2001 and this August, average Spanish property prices rose by 94%, that is they almost doubled. How could people afford to buy property when prices were far outstripping incomes? The answer is easy mortgage credit. Relative to Spanish incomes, property is still over priced, at least as far as this index is concerned.

But then again, you can’t take this index too seriously. It’s based on valuations, not actually transactions prices, so it only tells us what valuations are doing. My guess is transactions prices are significantly below the index, so maybe property isn’t that over-priced after all.