Reply To: Will people rent or stay away now the boom is over?



@ashtondav wrote:

Are off-plan prices so low that developers have stopped work or not started on new developments? Here and there, yes, perhaps. But on the whole the cranes still grind on and the bulldozers still clear new sites.

In short, it is virtually impossible for prices to slump unless major economies tip into recession and/or interest rates massively increase. There has NEVER been a housing “crash” without BOTH of these events. NEVER, NEVER, NEVER!

You seem to suggest that the demand for Spanish property is infinite and therefore supply will never affect the price which I disagree with. I believe that the cranes still grinding on and the bulldozers clearing sites is part of the problem.

I think that to compare renting to buying you should compare the amount of rent with the amount of interest you would receive if you kept the money in the bank.

Less than 3 years ago I was renting an apartment for €2,880 per annum which would have cost €132,000 to buy. The same money in the bank was earning me €6,600 per year at 5% interest in the UK at the time. So, I saved €3,720 per annum.

I calculate that for rent to be considered dead money, i.e. greater than the amount received in interest if the money is kept in the bank, that euribor would have to be around 2% and then ECB base rates would have to be roughly 1.5%. If that happens then it will be a sign that we are in a serious recession.