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Spanish house prices could bottom out in 2014 say Deutsche Bank

The German bank adds its voice to the growing chorus mooting the end of Spain’s property price crash.

deutshe-bankIf Spanish property prices continue falling at their present rate (official figures) they could bottom out in 2014, say Deutsche Bank (DB), in their latest report on the housing markets of the Eurozone.

Why the relative optimism about Spain? The first sigsn of a mild economic recovery are part of the story; the Spanish economy grew a fraction in Q3 after nine consecutive quarters of contraction. If this really is the end of the recession, then “house prices in Spain could be touching bottom,” says the report.

The bank divides up the Eurozone into three groups based on house prices: One group where prices have plunged including Spain, Portugal and Ireland, another group where prices have remained stable including France and Belgium, and a third group where prices have been rising, including Germany and Austria.

“The recession takes its toll”

Ireland is the Eurozone country where prices have fallen the most, by around 50pc, followed by troubled Mediterranean economies like Spain, Greece, and Portugal, which are sitting on declines of around 30pc, estimate DB. “The recession takes its toll,” observe DB.

Despite house price declines in Spain of around 30pc, based on official figures (in reality, the decline has been more like 40pc to 50pc), DB point out that housing affordability has not yet fallen in line with its long-term average. That suggests that house prices and rents are still too high in relation to Spanish family incomes (housing affordability in Spain has nothing to do with the price of holiday homes).

Given the present rate of declines, DB forecast that housing affordability will reach its long-term average next year, and undershoot it by 10pc in the following couple of years.

In conclusion, DB say that “the process of price adjustment could come to an end in 2014” for countries like Spain and Holland, where prices have fallen heavily, whilst Germany can look forward to another year of rising prices. Most other Eurozone countries, however, might have to learn to live with declining house prices in the coming years.

If they are right, Spain could be one of the best property investments in Europe over the next five years.


SPI Member Comments

5 thoughts on “Spanish house prices could bottom out in 2014 say Deutsche Bank

  • Curious how vested interests are constantly being quoted as experts and their opinions presented as authoritative knowledge.

    “Given the present rate of declines, DB forecast that housing affordability will reach it’s (sic) long term average next year, and undershoot it by 10pc in the following couple of years.”

    “Housing Affordability” is one of several fashionable weasel phrases which are being misused by vested interests in an attempt to sell over-valued assets as worthwhile investments to the unwary. The practise of assessing value on “affordability” is a phenomenon that appeared around the same time that house price -to- real earning ratios flew off the sanity scale. I’m sure it’s a just a coincidence.

    • Mark Stücklin says:

      I see the problem with vested interests, but I think most people see it too, so I’m not that worried about people being duped. Also, the likes of DB might have a vested interest, but they are the ones who do the research and produce the reports. Sadly, there’s not much market news being produced by people without a vested interest, and for as long as I continue to offer this content free, that’s the way it’ll be.

      In this case you can’t really accuse DB of using housing affordability to argue that house prices are cheap – they point out that prices are still too high in relation to incomes.

      I’m more annoyed about the it’s, which is a common mistake of mine that there is no sub to pick up. I’ve corrected it.

  • Chris Thorpe says:

    Incredible to think that anyone in Spain could be convinced that house prices have found a level or will increase in the foreseeable future. The feeder market of young Spanish buyers is not there due to massive unemployment and the mortgage prohibitive low wages of the employed – that’s if any banks are prepared to lend. The precarious jobs market, EU dependence and erratic government dissuade those working to increase their liabilities.

    Estate Agents will always talk the job up as will those with a fiscal interest in the market and whilst
    high-end or life-style properties will always attract wealthy cash buyers from abroad the average house price will have to drop quite a lot more before they become an attractive proposition.

    Until the government take El Toro by the horns and change the vague laws that don’t provide outside investors any confidence and show that they can govern without their fingers in the till, the UK press and other EU media will continue to publish negative information that adversely affect sales.

    I have always been amazed that buyers will pay huge sums of money for houses that are so poorly built that they would not get past damp-course inspection ( if they had them) in any other EU country, apart from Portugal. Most Spanish houses are still being built using ancient materials and methods and foreign buyers have historically handed over their hard-earned without even bothering with a structural survey!

    One way to get house prices on the rise again is to get rid of a few hundred thousand or so of the units currently on the market. Why doesn’t the government use the unemployed skilled labour pool to form
    co-operatives in order to finish many of the developments for affordable housing – this provides work, takes out some units and will give the co-operative the rental income. The same co-operative work forces could also undertake many more refurbishments or completions on behalf of the government which would supply much needed social housing.

    The problems affecting the Spanish property market won’t fix themselves – action is required!

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