Spanish property prices rose a hefty 288% in Spain’s decade long real estate boom (1997 – 2007), according to a new report from a research foundation run by BBVA, one of Spain’s largest banks.
As a result, the value of Spain’s housing stock reached 5.3 trillion Euros at the height of the boom, but has subsequently fallen 4.8% to 4.5 trillion Euros today.
Land prices – one of the key drivers of house prices – rose by an average of 25% per year during the boom, more than double house prices (12% p.a.), and 9 times more than the general rate of inflation.
What caused Spanish property prices to rise far ahead of inflation, income, and growth? Not speculation, says the report, a conclusion that many people with real experience of the market might dispute. As far as this report is concerned, prices were simply pushed up by rising demand for housing, stimulated by low interest rates, falling unemployment, and massive immigration.
Winners and losers
The report identifies some winners and losers from Spain’s property boom, but the analysis is superficial. Developers and property owners who cashed in at the right time are presented as winners, whilst today’s house hunters are the losers. The report fails to mention the corruption, economic distortion, and environmental damage that came with the boom. No mention of the investors who financed the boom either, though maybe because their loses have not yet been fully realised.
The report also reveals that it takes 12 years average salary (19 in Madrid) to buy a home in Spain today, up from just 5 years in 1998.