But despite falling around 30pc since the peak, Spanish house prices are still higher than they were in 1999 when the boom started, according to a comparison of house prices in Europe and the US by Goldman Sachs (based on official figures).
The chart above, created by Goldman Sachs, compares peak-to-present nominal and real house price changes in Europe and the US. House prices have fallen the most in Ireland, followed by Greece and then Spain. Over the same period (since around the start of 2008) house price in Germany have risen by around 20pc in nominal terms.
But if you look at house price changes since Q1 of 1999 (see next chart), when the real estate boom in Spain began, nominal house prices have performed best of all in Spain, recent falls notwithstanding. In Germany, property prices are still lower than they were 14 years ago, and Goldman say they are still undervalued, despite recent gains.
In real terms, house prices have risen the most in the UK, followed by France, Spain and Ireland. So Spanish real estate has been a good investment over this period, right? Well, perhaps, but not as good as this chart suggests.
The problem with this analysis, as usual, is it’s based on official figures, which in the case of Spain significantly understate the extent to which house prices have collapsed since the peak. 40-50pc down is more realistic than the 20-30pc stated by the official figures. In which case Spanish real estate has given up much more of its gains since 1999 than the chart above suggests.
Goldman Sachs forecast that house prices in Spain, Italy and France will continue falling, whilst Irish prices, having decreased 20-25% more than those in Spain, have now bottomed out. But Goldman Sachs are using dodgy figures for Spain, so their forecasts could be out. That said, I agree that average prices will continue falling this year and next year.
But who really cares about average prices unless you are a bank analyst? If you are thinking of buying or selling property in Spain, what matters is the price of property that interests you, not the national house price index.