The Economists Global House Price Index shows Spain still 44pc over-valued relative to rents, despite recent price falls. Don’t believe it.
House-price indicators for selected countries are given in the table above. Spain is one of the countries where prices are falling the most. But it hasn’t been enough, if the figures The Economist use are to be believed.
But as I have to point out every time The Economist publishes this index, you have to take these figures with a pinch of salt as far as Spain is concerned.
The problem is they are based official figures, which as regular readers of this blog will know, significantly understate the true extent to which prices have fallen in Spain. In reality, Spanish property prices have fallen much further than this index suggests, which means property isn’t so over-valued compared to rents.
The bottom line is Spanish property price data can’t be trusted. If you want to know what’s going on in the Spanish (residential) property market, a much more revealing figure is the collapse in planning approvals, down by 90pc since 2006.
Dwell on that figure for a moment: -90pc. That’s not a recession; that’s a total collapse of an entire industry that was responsible for much of Spain’s growth in employment and GDP for the last decade.
Against that background, how likely is it that house prices have only fallen 13pc, as official figures suggest? No chance.
I have seen plenty of examples of -50pc. Prices are starting to get interesting.