The latest study by the Tecnocasa chain of estate agents, in collaboration with Pompeu Fabra University (UPF), shows that house prices have fallen much further than official figures suggest, in a market where investors are playing an increasing role.
Spanish house prices (resale) have fallen 59pc since they peaked at the start of 2007, say Tecnocasa and the research team at UPF, based on the analysis of real sales prices from transactions handled by the Tecnocasa network. They plunged by 13pc in the first half of 2013 alone (to an average of 1,439 €/m2).
This contrasts with official figures showing prices (resale and new) down around 30pc since the peak. Official figures are based on valuations or prices recorded on deeds, which are often not the real price. I know which figures I would rather trust.
The report also confirms that cash buyers now dominate the market, being the acquiring party in 58pc of transactions (more than 60pc in Barcelona), whilst the mortgage drought rolls on.
Small investors pile in
Perhaps the most interesting point to come out of this report is the rapid growth of investors in the market. The percentage of investors increased by 7.5pc in Q2 alone, to 24pc of buyers, 74pc of whom were cash-buyers. In Barcelona, investors are now 32pc of the market.
Investors are attracted by prices that are starting to look like bargains. More than half of sales in Spain’s principal cities, with the exception of Barcelona, were under €100,000. In Barcelona, half of sales were under €150,000. In the boom, the figure for Barcelona would likely have been more than €300,000.
It’s not just small local investors.Foreign investors are also looking at Spain in greater numbers. At a national level they were 17pc of buyers, but in Barcelona they were 29pc. So more than 1 in 4 buyers in Barcelona were foreign, according to Tecnocasa.
Who can blame them?
Investors are also attracted by higher rental yields that compare favourably with the interest paid on bank deposits, which barely cover inflation these days. Rental yields in Barcelona are now 5pc to 7pc, according to this report, compared to bank rates of around 3pc. If you have €150,000 in savings, where would you rather put your money? In a property priced 60pc below the peak offering a 5pc rental yield with some upside potential when the market recovers, or a bank account with high charges paying 3pc, plus the risk the bank will do down with your money – just look at Cyprus? Small investors are doing the numbers and choosing Spanish property in increasing numbers. So are foreign buyers.