Vendors dropped their asking prices in June the most since the bust began, according to the resale asking price index from idealista.com, a property portal. Fiscal changes and a bank bailout spell more trouble for private vendors.
The price expectations of people trying to sell their homes in Spain fell by more than 10pc over the last 12 months, as illustrated by the graph and table below.
This is the first time since the Spanish property boom turned to bust that vendors have dropped their asking prices by double digits, and the trend looks set to continue.
Fiscal changes and European bailout spell more pain for vendors
Private vendors might feel they are already digging deep, but they might end up the biggest losers from the European bailout for Spain’s banks.
The bailout means that banks can afford to drop their prices (and will also be forced to) whilst offering better mortgage conditions to people who buy one of their repossessed properties.
As banks control the property market, private vendors in Spain will have no choice but to follow suit, and swallow the resulting losses.
Spanish bank losses, on the other hand, will be paid for by German taxpayers.
In return for a European bank bailout, Spain is also under pressure to eliminate tax breaks for home buyers. If the changes being discussed do go through (for example, eliminating mortgage tax relief) buyers will have less money to spend on housing, forcing vendors to drop their prices even further.