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This housing bust is worse than the previous two

This housing bust is on course to be worst since the transition to democracy, according to a new report by the Bank of Spain

The graph above compares property price falls in the last three down-turns (1979, 1991, and 2007). This one is on course to be the worst of the three.

House prices won’t bottom out until next year, if the past is any guide. But given the severity of this crash, nobody should be surprised if they take 6 years (or even 7) from the peak to bottom out this time around.

Spanish property prices have fallen for 4 consecutive years, with the biggest drop happening last year, as illustrated by the next chart.

Now comes the Bank of Spain’s baseline and worst case forecasts for house prices (comparing this cycle to previous ones) and land prices. Prices will fall the most this time around even in the baseline scenario. In the worst case scenario house prices will fall 40% in real terms to 2012. If you ask me, that has already happened.

And finally, and chart comparing house prices in real terms for a selection of countries. Spanish house prices have come down more than the UK and France, but not as much as Ireland, and nothing like the USA, where prices are almost back to where they were in 1997.

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