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Expectations of lower house prices on the wane

Almost half of Spaniards expect house prices to bottom out next year, as the era of cheaper-price expectations shows signs of drawing towards a close.

When enough people expect house prices to fall, that is exactly what they do, as buyers wait for cheaper homes and motivated vendors have no option but to oblige. For the last few years Spain has been locked in this spiral of self-fulfilling expectations, but the latest survey of consumer confidence by the Centre of Sociological Investigations (CIS) suggests this negative dynamic is unwinding.

According to the latest survey, 46pc of Spaniards think that prices will stabilise next year, up by almost 10 points compared to last year, when 37pc expected prices to stabilise in 2013 (and they were wrong).

On the other side of the confidence scale, those who expect house prices to fall next year have declined from 53pc last year to 37pc now.

A small but growing proportion of Spaniards are bullish about house prices: 7pc expect prices to rise in 2014, 2.5 points higher than last year.

A growing belief that prices are bottoming out is bound to bring buyers out of the woodwork, which might explain why 3.8pc of respondents say they plan to buy a home next year, almost double the 2.1pc rate who said the same about this year.

House-price expectations are self-fulfilling. The time when a majority of Spaniards believe that house prices will stabilise or rise can’t come soon enough for the battered Spanish economy.

However, no amount of hoping that house prices will rise will achieve anything without an increase in mortgage lending. That is the big variable to watch next year: when Spanish mortgage lending starts to rise, you know house prices and demand for property for sale in Spain won’t be far behind.

SPI Member Comments

7 thoughts on “Expectations of lower house prices on the wane

  • I am sorry but this sort of wishful thinking got us into this mess to start with. Anyone who expects an upturn need only look at the continual decreasing value of the property market. I do think your copy far too often gives false dawns by grasping the slightest bit of apparent good news or opinion and reinforcing it. Please tell it as it is and let us get away from destructive denial . When the upturn comes it will be apparent no could, would or maybe.
    John Cook

    • Mark Stücklin says:

      John, the upturn in any market is only every apparent in hindsight. There has been some more positive news, or at least forecasts, in recent months, but against a backdrop of five years of bleak news. It makes a refreshing change to be able to report more positive news that you call wishful thinking. It’s a fact that house price expectations can be self-fulfilling. It’s a fact that expectations are improving. It’s a fact that house prices won’t rise until mortgage lending returns to normal. I’ve never said we are out of the woods yet. I don’t think it’s fair to accuse me of wishful thinking on this article.

      • Being on the ground here in Marbella there are definitely positive signs. The notaries are far busier, as are several of the lawyers in the area, handling house purchases. I agree with Mark, when it comes to reporting nothing but bad news over the last 5 years, its nice to point out actual positive indicators for a change.

        We all know that this recession has been long and runs deep, as irresponsible lending and a bubble in the housing sector were largely responsible for the state of the Spanish and indeed global economy issues. However, I am of the opinion that if there is positive news it should be reported. If prospective buyers get on a plane thinking that its all doom and gloom, they will get a shock when they come to Marbella and see things moving, albeit slowly and vendors being a little more aggressive on their asking prices.

        I constantly consult your blog Mark and think you provide invaluable, honest information. Both good and bad.

  • Hi,

    I would love to know how to spot when mortgauge lending starts to rise. I live and work in Spain and have been hanging on for the last few years hoping things will come down to a level I afford (I live in Barcelona where drops have been less steep than elsewhere). Can anyone tell me how to spot when lending starts to increase? I agree this is a more important factor for an upturn than demand or expectations.


  • Interesting to compare Spain with Ireland.

    House prices in Dublin are now 48 per cent lower than they were at their highest level in early 2007. Apartments in Dublin are 56 per cent off their boom-time peak in February 2007. The fall in the price of properties in the Rest of Ireland is somewhat lower at 47 per cent.

    Overall, the national index is 47 per cent lower than its highest level in 2007.

    Yet prices appear to have now bottomed out in Ireland, and are in fact now rising.

    If Spain follows Ireland then prices have, say, another 10% to fall before they hit bottom at the same price they were in mid 2002.

  • If 22.2% of the cost of building residential property now goes on taxes and and there is the lunatic idea that VAT on new build should go UP, you can kiss any recovery goodbye. The Spanish seem to persist in digging energetically despite being at the bottom of a very deep hole.

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