Yesterday it emerged that the sales of Spain’s largest listed developers fell by more than 70% in the first quarter of 2008. Today we read that Caixa Catalunya – one of Spain’s leading savings banks – forecasts that average Spanish property prices will fall by 2.2% in 2008.
2.2%!!!! What planet are they on?
In reality, average prices are already significantly down on last year, perhaps by as much as 10% or more. Just ask any taxi driver, bank manager, ex-real estate agent, or waiter in your local bar. It’s what they call common knowledge. They only people who don’t appear to know are officials at the ministry of housing, and ‘expert’ authors of reports like this one.
At least the report, titled ‘Informe sobre el consumo y la economía familiar’ (Report on consumption and household budgets), recognises that prices might fall more substantially in some areas, for example in Madrid (6.6%), the Valencian Region (5.6%), Galicia (3.4%), Aragon (3.2%), Cantabria (3.1%), and La Rioja (2.5%). The smallest fall in prices is forecast for Murcia, with 0.4%, whilst property prices in Catalonia and Andalusia are predicted to fall by just 1.2%.
We know that the market is plunging, with developers’ sales down 70% plus, overall transactions down by close to 50% in key regions like Catalonia, and yet the best the suits at Caixa Catalunya can come up with is a fall of 2.2%. Suggests to me they don’t know much about economics, and the laws of supply and demand.