The coronavirus price discount forecasts from the property industry in Spain have been pretty modest so far. This one, from the President of the Remax real estate agency network, talks about a coronavirus discount of up to 20% this year.
Javier Sierra, President of Remax in Spain, a real estate agency franchise with more than 150 offices around Spain, forecasts that both sales and house prices will decline by between 10% and 30% in 2020. Banks are typically forecasting a decline of around 6%.
This is one of the most negative forecasts from someone in the industry I have seen since the crisis began, and comes from a player who can draw on a large network for information.
In an interview with the Spanish property portal Idealista, Sierra makes the point that price discovery takes longer in the real estate than other markets, which delays the price adjustment needed to bring together buyers and sellers.
“We mustn’t forget that the real estate market takes time to adjust because sellers need time to find out at what price they should sell at, and the same happens to people who need to buy,” explains Sierra. “But in the end, in the medium term, what will happen is that this year there will be fewer transactions, between 10% and 30% less, and therefore house prices will adjust according to [local] markets; at present we expect an average fall of between 10% and 20% this year.”
The lack of price transparency in the Spanish property market means that you can find some spectacular bargains in a crisis, alongside a lot of properties that are priced to never sell. Overall, however, risk-averse buyers and sellers take a long time to adjust their expectations because nobody really knows what the market prices is. This drags out the distress, and means the Spanish property market takes longer to come to terms with reality than other more transparent property markets where buyers and sellers can check actual sales prices online for free.
Chris Nation says:
I’m a rank amateur who just happens to have a flat to sell in the city centre of Valencia. I had 7-8 viewings in the two weeks before the lid went on, 14/03. I have my first since then tomorrow, Monday 01/06. The agent is back in the business of showing properties. So, the hiatus has been 11 weeks.
“We consider that these sources reflect the current market more accurately than if we were relying on comparison to historic valuations or registered sales, which information always lags behind the market.”
Historic? Does a hiatus of 11 weeks qualify valuations prior to lockdown to be ‘historic’? We’re not talking 1939-1945 or some other period stretching into years, with the material and social changes that WW2, for example, brought about.
Property pros will know the actual shape of the graph but anecdotally there are dips in property sales figures at certain times of the year, every year, in all markets. Summer holiday season, Christmas/New Year… sales don’t fall to zero but still, these slack periods occur and are not regarded as periods of crisis or anomalous conditions.
Did prices ‘re-adjust’ after the bubble burst ? Is that re-adjustment now irrelevant and a new datum required?
“… house prices are forecast to fall between 20% in northern Spain and 44% in southern Spain.” 44% – not 43% nor 45%, you note – is a colossal fall. What is the reason for this? What is the rationale behind this forecast?
Figures quoted by institutions and individuals in Mark’s two valuation articles, 23/04 and 29/05 vary from 6% to 44% [southern Spain]. Anyone looking at this level of variation, not knowing what they referred to, would say, “Whatever it is these figure are forecasting, nobody has a clue.”
Just to show willing, I cut my asking by 2.5%
Mark Stücklin says:
All good points Chris. Let’s hope your 2.5% makes the difference. I guess your target market is as much local as foreign, right?
Vanessa Schön says:
Hi Mark
I have been following you for some time now. We just sold our house in Spain and I know this is a long shot question but do you by any chance know or can recommend a site for long and short term predictions on property market in Portugal or where I might look for such a portal?
Regards
Vanessa
Mark Stücklin says:
Hi Vanessa. I’m sorry I don’t know of anyone who does what I do for the Portuguese property market. Perhaps I’ll get around to it one day. Are we losing you to Portugal?
casa cuco says:
Why can´t Spain have some kind of Zoopla type register where recent selling prices are registered and shared. This lack of transparency is doing the market no favours.
Mark Stücklin says:
I couldn’t agree more. The lack of transparency makes the market much riskier, and puts of a lot of people. Of course if the market was very transparent people might be less interested in my blog 😉
David Brock says:
Exactly…..