Spanish house prices are going to continue falling for 2 years before turning up again, if the past is anything to go by (charts).
There are some fascinating charts in the Bank of Spain’s latest monthly economic bulletin, published today. They illustrate the drama of the Spanish property crash, and give us a hypothesis of where house prices might go from here.
First of all, a couple of charts showing how the supply of new homes outstripped demand for most of the last decade (left-hand chart), leading to today’s glut, which the bank estimates at somewhere between 700,000 and 1,200,000 homes (right-hand chart).
Now comes a map showing where the glut is concentrated, measured as a percentage of the local housing stock. The biggest glut is to be found in The Valencian Community, Murcia and Cantabria (all in blue), where the glut is over 6% of the housing stock. Andalucia is in the second group with a glut of 3.6pc of the housing stock.
Turning to house prices, the next chart on the left shows how official house prices have fallen back to where they were around 2005, which is not to say they won’t fall further (in reality, official figures belie the true extent of the crash – prices have fallen significantly more than they suggest).
The chart on the right is the one I find most interesting. It compares the price evolution today to previous property slumps (1979 & 1991). In both previous cases prices fell for about 4&1/2 years before bottoming out. So if the past is anything to go buy, prices today will continue sliding for another 2 years, and could fall another 10pc if this turns out to be a repeat of 1979.
And finally, a map showing peak-to-present price falls by province, all according to official figures, of course. Biggest falls marked in blue, lowest falls in yellow. Most of the provinces where foreigners tend to buy holiday homes – the islands, Malaga, Almeria, Murcia, and Alicante – are in blue, with price falls above 15pc.
The biggest decline of all goes to Malaga, home of the Costa del Sol, down 20pc sine the peak.
Read full BOS report (in Spanish) > Present Situation of the Adjustment in Residential Investment in Spain and BOS Economic Bulletins Index