Mark Stücklin
The average property price in Spain has finally clawed its way back to the levels last seen at the height of the 2007 boom. But that’s only half the story – it’s a recovery only in name, not in real value.
According to the latest figures from the Spanish notaries, the average price per square metre reached €1,883 in Q2 this year. The last time it was above the €1,800 mark was in Q2 2007 – almost 18 years ago, when Spain’s real estate bubble was at full stretch.
So, does this mean we’re back in bubble territory? Not really. Back then, prices were inflated by speculation and easy credit – banks handing out mortgages to anyone with a pulse. Today, prices are largely driven by fundamentals: more buyers chasing fewer homes, with lending conditions kept in check by far stricter rules.
And once you adjust for inflation, the picture changes dramatically. That €1,883 per sqm today is only worth about €1,346 in 2007 terms – still a full 26% below the bubble peak. In real money, today’s “record” prices are only three quarters of where they stood before the crash.
Which is one reason why you could argue that Spanish house prices are not yet in bubble territory. Nominally, we may have circled back to the old peak. But in real terms, the market is still some distance away – and looks very different this time round.
Speeding up
It’s also worth noting that the notaries reported an 8.4% year-on-year increase in Q2, while the National Institute of Statistics (INE) has just published a figure of 12.7% for the same period – the fastest pace of growth since the bubble years of the early 2000s. Without the easy credit that fuelled that era, it’s hard to see such rapid price growth being sustainable for long.
The chart below illustrates the year-on-year change in Spanish house prices across a range of data sources.
