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