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More Spanish property price forecasts

All agree that prices will continue falling, the question is how much, and can the data be trusted?

Spanish house prices have fallen 18pc from the peak, according to the Government’s House Price Index. Is that enough? Not according to Isidre Fainé (pictured above), head of La Caixa, Spain’s biggest savings bank, who says house prices could fall 50 to 60pc peak-to-trough.

Fainé doesn’t have a crystal ball, but he does have the biggest branch network in Spain at his command. And unlike many other Spanish banks, La Caixa can probably afford the write-downs such a fall would imply. We have to assume he is well informed.

La Caixa are not alone forecasting more big falls. International rating agency Fitch say prices need to fall by 30 to 35pc peak-to-trough, or almost double what they have so far, before the market bottoms out.

Who am I to disagree with such illustrious names, but I have to point out an important flaw in all arguments that use the official house price index to show that prices haven’t fallen enough. The official index is more misleading than it is revealing. In reality average prices are down somewhere between 30 and 50pc, not the 18pc the index would have us believe.

This faulty index is a big problem for Spain. The index is taken at face value by international organisations and publications like The Economist, the OECD, the IMF, the European Commission, not to mention rating agencies like Fitch. Thus they all think Spanish property prices have only fallen 18pc and have much further to fall, when in reality the prices at which homes actually sell have fallen much more than that.

True, there is still a lot of over-priced property on the market, but what is a house price index supposed to show? Asking prices or sales price? The latter, of course.

SPI Member Comments

15 thoughts on “More Spanish property price forecasts

  • So you have the house for sale for 285 k. That says nothing. Come back when you have sold it and tell us how much you got, what you ask is not interesting. Maybe a serious buyer is interested to offer max 100.000 Eur – and thats the only offer you got…..
    NOTHING is worth more than someone is willing to pay. What you are asking is totally irrelevant

  • I saw on the link that the price is now 265,000 and agree with the other comment. I bought a 4 bed with pool brand new in Sept 2004 for 253,000 and sold Sept of 2011 for 250,000 and feel very lucky to get my money back (less expenses of course). Any one who bought 2005 – 2007 will never get their investment back. The real problem is finding someone to buy at ANY price. We got lucky but I still see in the same area asking prices or over 300,000 dreamers!!!!!The real value is ‘0’ until a buyer comes along.

  • David Painter says:

    Problem is you cannot chase a downward market.
    I had a villa built in 2007 spent over 800k euros
    Had the Spanish experience with Lawyers Builders
    Town Hall.To put it on the market now would be
    financial suicide.
    Its only worth what its worth when you sell it.
    Will continue to enjoy the sun until then.

  • Presumably location, as ever, is a key factor. I’d have thought a front-line apartment in Benidorm is less susceptible to this forecast of a further large fall?
    Sadly! ‘Cos I’m looking for an apartment in Benidorm…

  • My wife and myself plan to buy a small flat around 50-70 square metres on the Costa Brava cost, budget around 140-160.000 euros. This implies that the flat will not be anything particular. With your experience how many percent do you expect that I bargain off the official price ?
    And if I can pay cash ?

  • Repeat. Nothing is worth more than somebody is willing to pay.

    If you have no buyers, no offers, nada, Whats the value = Nada!

    Our neighbour boght the house in 2001 for 250.000 Eur, have spent about 300.000 Eur, new pool, garages, terrases etc. etc. etc. he has tried to sell for 4 years, he is now down to 250.000 Eur asking price, no interest, no offers, nada…. Thats the reality for many in todays market in Spain. Talking about price drop is irrelevant.. The problem is to find any buyer at any price. If houses in Spain where made of wood, people would burn them down to the ground trying to get insurance money. Unfortunately, bricks and concrete does not burn well.

  • Lets put it simply; Spaniards favorite pastime is denial especially if they have something to lose. Logically property is about 50% overvalued from its 2006 value. But if tomatoes are as little as 50c/Kg in the market and no one needs them their value at that time is zero! As John said “No buyers = no value!”.

    I cannot see things changing without a departure from the Euro and a devaluation of 30-50%. Even then the Spanish will need a change in it’s attitude towards their benefactors i.e. Foreigners.

  • Its the same in villages too ! House we like is marketed at 195000, Agent said `reduced` from 295000, a bloody stupid price and totally unreaslistic to start with!, Vendor will not reduce because he owes the bank !! Unbelievable, while he sits there building up more debt the house sits there falling ever more in value , he probably hopes a fool will come along and pay over the odds so he can eithet top up his pension or clear his own debts to the bank !
    Agent tells us he turned down an `offer`, we said if the offer was in region of 165000 then the Vendor should have ripped his arms off !!
    Needless to say, still on market and now we feel unable even to waste our time anymore on trying to buy a place , Agents, Vendors , dodgy Lawyers and even more dodgy Local Councils , who needs it ! We are going to look elswhere as it seems no one in Spain appears to live in the real world at all !Having said that we are in Pego next week , booked up last year, wish we hadnt bothered but no more house hunting , we are through with the lot of `em! By the way, the main idiot Vendors are Brits , not Spanish , even the Spanish are being more realistic if they are serious Vendors , but the Brits , oh don`t get me going!!
    No , we are not looking to screw anyone or seeking that grubby `bargain`, just a reasonable town house in a small village , no pool, big garden , just a small Spanish Townhouse ,even then no one can tell us if it includes the furnishings or any thing else , Vendors live in UK, what more needs to be said?!!

  • Paul Whittaker says:

    I really don’t find general statements about price falls in spain useful. There is so much difference according to location and type of property that a house or flat can be sellable on one site and an identical house a kilometre away can be unsellable.

  • Vernon, forget about these idiots. Many of the seller just refuse to realize the reality. But they will have a brutal awakening and regret that they did not sell when they had the chance, in 10 years from now, the prices will be lower than today, for sure.

    Rent a place and let the idiots loose more money. For every day, there are more and more objects for sale and people will start to be desperate to sell their houses, then they HAVE to face the reality.

    Realisticly, compared to average price in 2006/2006, the price should come down like 75-80% from the top to be reflecting the quality and building standards you have in spain.

    AND all Spanish banks are in princip bankrupt. They keep going because they have all the houses and building projects on grossly inflated values on their balance sheet. The day when they can not get more money from ECB and they HAVE to sell the assets to raise cash, you will see tens of thousands more objects being dumped on the market, for sell – at any price. The alternative for the bank is to go belly up ad die. That is going to happend to some banks in spain, so dont have more than 100.000 EUR on any account in Spain because if the bank go bankrupt you loose everything over 100 KEUR.

    We have only seen the beginning, this is going to be much worse.

    Rent and let someone else take the hit.

  • Would love to buy a property in (SantFeilu ) Costa Brava Just wonder is this a good time to buy prices still more expensive then other parts of Spain. They still have not dropped much . Love your column mark

  • @Kay murphy. We’re in St Feliu de G. and our advice is: sit back. The pricedrop has only just begun here. Finally the wealthy Catalans are beginning to feel the pressure. Sooo many properties are for sale here and I’ve seen asking prices drop from 850k to 700 to 600 to 500 to 350… but there just are no buyers. Locally another 25% drop is anticipated for 2012. And then there is 2013…

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