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SPANISH PROPERTY NEWS
February 2007 news review
Every year, at the end of February, I review the performance of the Spanish property market in the previous year, and look at the forecasts for the coming year. The bottom line is that 2006 was a difficult year in many parts of coastal Spain (but not all). But it’s also clear that, when the price is right, attractive properties in pleasant areas don’t hang around, and potential demand is still strong. In my opinion there is no point waiting for attractive, quality properties to fall to bargain prices because I don’t think it will happen. On the other hand it should be possible to find good value this year, but only if you do your research. And in this jumpy market, buyers would be well advised to focus on quality property, which always holds its value in the long term.
For more detail on forecasts for 2007 check out the report (see below).MARK STUCKLIN
Spanish property market review
A review of 2006, plus forecasts for 2007 + more
Spanish Property News
Spanish property market slowdown is talk of the town
The slowdown of the Spanish property market was a popular topic in the Spanish press during February.
The Spanish daily ‘El Pais’ reports that “the party is over”, at least according to Joan Ollen – president of Barcelona’s professional association of estate agents. This is based on the fact that sales of resale properties have fallen by between 40% and 50% since June 2006. Figures from the land register also reveal that the number of property transactions in Spain has been falling for some time, with 22,800 fewer transactions in the first quarter of 2006, compared to the same period the year before. The almost complete disappearance of property investors is one of the causes of the slowdown mentioned in the article.
An article in the Spanish financial newspaper ‘El Economista’ says that property developers in Spain are beginning to feel the pinch in their pockets, as their margins shrink. The article refers to a new report from the consultancy ‘Grupo I’ showing that developers’ before tax margins have fallen from 15%-20% in 1990, to 13-18% in 2005, and 9%-14% this year (expected).
All of which is keeping developers awake at night, according to an article in the Spanish daily ‘ABC’. What most worries developers is a price war if some start offering discounts to try and shift the many newly built properties presently hanging around on the market. Developers who drop prices and make sales may benefit, but it might lead to a slump in the price of newly built and off-plan property.
Developers in the Autonomous Region of Valencia see the slowdown as a return to ‘normality’, according to an article in the regional newspaper ‘Levante’. In the recent boom years 50,000 properties were built and sold each year in the province of Alicante alone. Between now and the year 2010 developers forecast 65,000 property sales per annum in the whole of the Valencian Region, of which only half will be newly built properties. The article quotes Benjamin Muñoz of the Valencian developers’ association as saying that the slowdown “is a return to normality, and not a crisis.”
Spanish mortgage rates rise again
Euribor – the interest rate most commonly used to calculate mortgage payments in Spain – rose again in February to 4.09% (to be confirmed by the Bank of Spain).
This is the 17th monthly increase in Euribor, and places it at its highest level since August 2001. Euribor is now 40.5% higher than a year ago, and 95% higher than in June 2005. This means that variable-rate mortgage interest payments in Spain have also risen substantially.
As a result of the latest increase in Euribor, monthly mortgage repayments on the average Spanish mortgage of 140,275 Euros over 25 years will increase from 696 Euros/month to 787 Euros/month, an increase of 91.5 Euros per month, and 1,100 Euros per year. The value of the average mortgage loan taken out in Spain grew by 12.6% in 2006, according to Spain’s National Institute of Statistics (INE). Overall mortgage lending grew by 23.3% in 2006 – the lowest level of growth since 2003.
Euribor is derived from the Eurozone base rate set by the European Central Bank (ECB). The ECB left the Eurozone base rate unchanged at 3.5% in February, but is expected to raise it gain at the next governing council meeting on 8 March, most likely by 25 basis points to 3.75%. Futures trading shows that markets expect the ECB to raise the base rate to 4% by September, even though inflation has stayed below the ECB’s 2% ceiling for the last 5 months.
Commenting on base rates during a February interview European Central Bank council member Axel Weber (head of Germany's Bundesbank) said, “We need to reach a rate level that's more appropriate than the current one.”
BBVA – one of Spain’s largest banks – expects the base rate to rise to 4.25% in 2007, with quarter point increases in March, June, and September. To some extent the present Euribor rate already reflects some of the expected increases in the base rate. Nevertheless, if the base rate does continue to rise, Spanish mortgage rates, and with them the financial burden on property owners in Spain, will also rise.
Chiclana – another Marbella?
The Spanish financial newspaper ‘El Economista’ reports of alleged plans by the town hall of Chiclana de la Frontera (Cadiz Province, Andalusia) to allow the construction of 40,000 illegal properties without planning permission (10,000 more than the number of illegal properties in Marbella). In the light of multiple urban planning irregularities in this municipality, Jose Chamizo – the citizen’s ombudsman of Andalusia (defensor del pueblo) – has called on the authorities to investigate at once. Foreigners thinking of buying in this area should take note and proceed with extra caution.
6 times more new properties than new resident in Galicia
The housing stock in Galicia (North West Spain) is growing 6 times as fast as Galicia’s population. In the last 6 years planning permission has been given for 204,000 properties, at a time when the population has only gown by 35,000 people. Which begs the question; who is going to live in all those new properties?
Spanish resale property asking prices at least 10% too high
According to a recent article in the Spanish daily ‘El Mundo’ the asking prices of resale properties in Spain are between 10% and 30% (or more) too high. Many experts expect the slowdown in Spain’s property market to bring down asking prices to more realistic levels.
Indebtedness of developers and builders worries Bank of Spain
Jose Luis Malo de Molina – director of research at the Bank of Spain – has expressed concern at the increasing level of indebtedness of Spanish developers and construction companies. Developers appear to be borrowing on the assumption that Spain’s real estate boom continue indefinitely, when all the evidence points towards a slowdown in the market.
Bank of Spain questions validity of official housing market statistics
High leverage in the property sector was not the only thing worrying Jose Luis Malo de Molina of the BoS in February. He also pointed out that the official statistics for the housing market in Spain are not good enough. Given that housing is one of Spain’s principal concerns, and house building one of the most important sectors of the economy, Malo de Molina thinks it is time to introduce more accurate and reliable statistics.
As things stand, the official figures from the Spanish ministry of housing are prepared using data from the professional association of architects, notaries, property registrars, and registered appraisal companies.
But as Malo de Molina points out, the data from these sources is often contradictory. One of the reasons for this is that many transactions witnessed by notaries are not then inscribed in the land register.
Spain at risk of property crash
Spain and Ireland are the 2 Eurozone countries most likely to suffer a real estate crash, according to a new report from American Express Funds. The report likens the situation in these countries to the US housing market between 2003 and 2005, which lead to the US real estate slump that started in 2006
© Mark Stucklin (Spanish Property Insight)
Spanish Mortgage Advice
Visit: www.progressmortgages.com
3/13/2007
http://www.spanishpropertyinsight.com
Spanish property market review & forecast
2006 - 2007
February 2007: Every year about this time I review Spanish property market’s performance in the previous year, and take a look at the forecasts for the coming year.
Spanish property market overview
A few years ago Spain was in the grip of a property boom, and foreign buyers were falling over themselves not to ‘lose out’. Much of the heat has now gone out of the market, not least because a constant stream of bad news has shaken foreign buyer confidence in Spanish property, whilst relatively high prices, and competition from cheaper destinations such as Morocco and Bulgaria, has reduced demand for Spain. It is now a buyer’s market in many popular tourist areas, and great value can be found if one is prepared to make the effort. But whilst the stock of unsold properties is accumulating, and prices in many areas are stagnating, there is still a sizeable overhang of overpriced properties lying in wait for ill-informed buyers. This is especially true of resale properties, as many vendors have not yet adjusted their price expectations to market realities. It may be a buyer’s market, but buyers need to be savvy, and seek out value if they are to avoid overpaying.
2006
According to the Spanish government’s figures, average national Spanish property prices rose in nominal terms by 9.1% over 12 months to the end of 2006, ending up at 1,990 Euros/m2. This represents a clear slowdown in Spanish property inflation, down from 18.5% in 2003, 17.2% in 2004, and 12.8% in 2005. Based on the Spanish government’s figures, it looks like the Spanish property market is on course for a soft landing, in which property prices will rise in line with general inflation.
Year
Property inflation %
1996
0.2%
1997
1.2%
1998
7.7%
1999
9.6%
2000
7.7%
2001
11.1%
2002
17.3%
2003
18.5%
2004
17.2%
2005
12.8%
2006
9.1%
Continuing with the Spanish government’s figures, property prices rose the most in the province of Lugo (Galicia) at 18.5%, and the least in Caceres (Extremadura) at 3.3%. It is interesting to note that the best performing regions last year were in central and northern Spain, which are largely ignored by English-speaking buyers. On the other hand Spain’s Mediterranean coastal provinces and islands were some of the worst performers: Prices in Alicante province (Costa Blanca) rose by only 5.1%, and in Tenerife (Canaries) by 5.6%, though Girona (Costa Brava) managed a respectable 13.2%, and the Balearics 11.8%. Madrid had a bad year near the bottom of the table with 6.1%, whilst Barcelona did somewhat better with 10.4%, up from 8.9% last year. Overall, though, the government’s figures paint a picture of a slowdown in the Spanish property market. + see full table of prices
Figures from Kyero.com – a leading Spanish property portal that publishes a Spanish Property Index - show that average asking prices fell in 2006, down by 1.6% to an average asking price of 245,000 Euros (asking prices are not the same as transaction values, which are likely to be between 5% and 30% lower in a buyer’s market). Kyero’s figures confirm the broad trends seen in the government’s data: The market is coming off the boil, and previously hot Mediterranean markets like Alicante (- 1.5%) and Malaga (+3.4%) are now struggling to deliver positive results. On the other hand the Balearics had a good year, up 15% to an average asking price of 458,800. Star performers were the provinces of Jaen (+23.2%) Seville (+17.8%), and Castellon (+16.6%). Jaen is still one of the cheapest provinces, with an average property price of 85,000 Euros, according to Kyero.com.
Interviews with property professionals in different parts of Spain lend some support to these figures, but if anything show that the government’s figures are too optimistic. Property professionals working in Malaga province on the Costa del Sol report that the overall market is tough, and prices are where they were 2 or 3 years ago. On the other hand they also report that attractive, quality property that is well priced still sells quickly. In Murcia and the Costa Blanca the story is more or less the same, though in the most over-developed areas of these regions it is increasingly difficult to describe anything as ‘attractive’.
In the Costa Brava and the Balearics, property prices still appear to be rising modestly, though properties are not selling as easily as they did 3 or 4 years ago. In Ayamonte, on the border with Portugal, off-plan investors were still driving the market in 2006, though that now appears to be cooling down. All agents, in all areas, report that demand from Spanish buyers was more robust than foreign demand, especially at the expensive end of the market.
So 2006 was a year in which the Spanish property market continued to cool down after the boom years of 2000 - 2004. Mortgage borrowing growth peaked, and foreign investment in Spanish real estate fell 12.6% (12-months to the end of October 2006), having also fallen in 2004 (-6%) and 2005 (-17%). Interest rates (Euribor) rose from 2.833% at the start of 2006, to 3.93% at the end, a 41% increase in percentage terms, adding another 1,000 Euros per annum to the costs of paying the average Spanish mortgage. Spanish property prices that have now risen on average 100% in the last 5 years, and demand, both local and foreign, is cooling in response to all these factors. As a result properties are taking longer than ever to sell, and the stock of unsold properties is increasing.
But perhaps the most alarming imbalance in the Spanish property market today is the high level of housing starts in Spain. There were approximately 800,000 housing starts in 2006, almost 3 times the EU average. Spain is Europe's biggest cement market, consuming 66 percent more than Germany, whose economy is almost three times as large. This is clearly unsustainable, and Spain’s economy has become alarmingly over-exposed to the construction sector as a consequence (50% of all Spain’s capital investment goes into real estate, which is also responsible for half of all new jobs and a sizeable chunk of both Spanish GDP and GDP growth).
If housing starts continue at this level, or even at the rate of 600,000 forecast for 2007 by the Madrid House Builders’ Association (ASPRIMA), Spain could hit a crisis of oversupply, if this is not already happening. As things stand the industry does not appear to be adjusting to cooling demand. In an unusual step the Bank of Spain has warned the property sector this February about expanding capacity and increasing borrowing at a time when demand is clearly cooling.
But despite the slowdown, it is also looks as if there are deep reserves of potential demand for Spanish (coastal) property amongst foreign buyers, principally the British and the Irish. A recent survey from the Institute for Public Policy Research shows that there are already 761,000 Brits living in Spain (990,000 if you include part-time residents), and millions more wish to join them.
The demand exists, but given a) Spain’s high property prices, b) the chance that prices might fall, and c) the stink of corruption and illegal building wafting from Spain’s property market, many potential foreign buyers are deciding to wait and see. So the problem is not the level of potential foreign demand for property in Spain, which I believe is still strong. The problem is that buyers are worried about risking their savings in a market blighted by corruption scandals, illegal building, mindless development, and dodgy property companies. It's essentially a confidence problem, not a demand problem.
One of the most important changes in the market is the fact that English-speaking buyers in general are now better informed, more aware of the common problems, and more demanding than in the past. This is a structural change that companies selling to foreigners will have to come to terms with. In the internet age, geographically dispersed buyers can share their knowledge and experiences to an extent that was not possible even 5 years ago. This has led to a power shift away from sales organisations and towards buyers.
To take advantage of the present market buyers need to be savvy, well informed, and looking for value. 2007 will be a good year for buyers who are prepared to look around, and do their research. Vendors who are serious about selling will need to drop their prices, as will developers of mediocre new developments (some of whom will run into financial difficulties this year).
2007 FORECASTS
OECDThe OECD expects a “modest correction” in Spanish property prices.
Lombard Street Research Ltd. (London)Diana Choyleva, an economist at Lombard Street Research Ltd. in London, is bearish, and predicts that the end of the housing boom will also be the end of Spain's boom. Bloomberg quotes her as saying, “You don't even need house prices to fall to have a big correction. All you need is house prices to stop growing. Most likely, things are going to begin to unravel in 2007. We've already had a slowdown in house price inflation.''
Spanish Ministry of FinancePedro Solbes – Spain’s Minister of Finance – says that Spain’s recent property price increases are “difficult to justify”, and forecasts that property inflation in Spain will fall inline with general inflation (currently 2.4%).
Economist, architect, and Spanish property expert Ricardo VergésProperty analyst Ricardo Vergés, of Spain’s association of architects, is quoted in the Spanish press as saying; “Property should cost 3 times annual salaries, not 6 or 7, as is the case in Spain today. Vergés thinks that a property crash is more likely than a soft landing.
Standard & Poor’s: International credit ratings agency Standard & Poor’s forecasts an ‘abrupt’ landing for Spain’s property market in a recent report entitled ‘Storm clouds over European Property Markets’.
Institute of Economic Studies (IEE): Given Spain’s booming economy, job creation, and increasing number of new households, the Institute of Economic Studies expects the property market to continue growing, and discounts any sudden price correction.
Caixa Catalunya: One of Spain’s largest savings banks forecasts that Spanish property prices will increase by 8% in 2007.
C.B. Richard Ellis: Real estate consultants C.B. Richard Ellis also forecast average property price increases of 8% for 2007, and do not expect property inflation to fall to general inflation levels for a couple of year yet.
BBVA: One of Spain’s largest banks forecasts that average prices will increase between 3% and 5% in 2007
The Spanish People: A survey of Spaniards by Gallup at the end of 2006 revealed that 29.4% believe property prices will increase considerably in 2007, 6% believe property prices will increase a bit, 15.2% say prices will stabilise, and only 2.3% of Spaniards believe that Spanish property prices will fall a bit or a lot in 2007.
And lastly.... For my part I’m bearish about the wider Spanish property market’s prospects for the next few years. I think that over supply, rising interest rates, scandals, and high prices will all take their toll on demand. A slowdown in the construction sector is inevitable, which could weaken Spanish economic growth significantly, and further reduce demand. As a result I believe the most likely scenario is one in which property prices in many parts of Spain stagnate this year, and stagnate or fall next year. I’ve been saying this for the last 2 years, and have been wrong the last 2 years. Sooner or later I’m going to be right.
I am more optimistic about the market for quality property in coastal areas, and other areas popular with European buyers, where demand is more diversified. I think attractive properties in good areas and on the best developments will hold their value in the short term, and deliver solid returns in the long term. But when it comes to mediocre property in over-developed areas all I can say is there is far too much of it around, and I am not optimistic about it.
Spanish Property Prices 2005 vs 2006
The following table gives average property prices by Spanish province and autonomous region for 2005 and 2006 in €/m2, and property inflation rates in 2006. Coastal regions popular with European buyers are highlighted.
Source: Spanish Ministry of Housing
© Mark Stucklin (Spanish Property Insight)
Spanish property market review & forecast
2006 - 2007
February 2007: Every year about this time I review Spanish property market’s performance in the previous year, and take a look at the forecasts for the coming year.
Spanish property market overview
A few years ago Spain was in the grip of a property boom, and foreign buyers were falling over themselves not to ‘lose out’. Much of the heat has now gone out of the market, not least because a constant stream of bad news has shaken foreign buyer confidence in Spanish property, whilst relatively high prices, and competition from cheaper destinations such as Morocco and Bulgaria, has reduced demand for Spain. It is now a buyer’s market in many popular tourist areas, and great value can be found if one is prepared to make the effort. But whilst the stock of unsold properties is accumulating, and prices in many areas are stagnating, there is still a sizeable overhang of overpriced properties lying in wait for ill-informed buyers. This is especially true of resale properties, as many vendors have not yet adjusted their price expectations to market realities. It may be a buyer’s market, but buyers need to be savvy, and seek out value if they are to avoid overpaying.
2006
According to the Spanish government’s figures, average national Spanish property prices rose in nominal terms by 9.1% over 12 months to the end of 2006, ending up at 1,990 Euros/m2. This represents a clear slowdown in Spanish property inflation, down from 18.5% in 2003, 17.2% in 2004, and 12.8% in 2005. Based on the Spanish government’s figures, it looks like the Spanish property market is on course for a soft landing, in which property prices will rise in line with general inflation.
Year
Property inflation %
1996
0.2%
1997
1.2%
1998
7.7%
1999
9.6%
2000
7.7%
2001
11.1%
2002
17.3%
2003
18.5%
2004
17.2%
2005
12.8%
2006
9.1%
Continuing with the Spanish government’s figures, property prices rose the most in the province of Lugo (Galicia) at 18.5%, and the least in Caceres (Extremadura) at 3.3%. It is interesting to note that the best performing regions last year were in central and northern Spain, which are largely ignored by English-speaking buyers. On the other hand Spain’s Mediterranean coastal provinces and islands were some of the worst performers: Prices in Alicante province (Costa Blanca) rose by only 5.1%, and in Tenerife (Canaries) by 5.6%, though Girona (Costa Brava) managed a respectable 13.2%, and the Balearics 11.8%. Madrid had a bad year near the bottom of the table with 6.1%, whilst Barcelona did somewhat better with 10.4%, up from 8.9% last year. Overall, though, the government’s figures paint a picture of a slowdown in the Spanish property market. + see full table of prices
Figures from Kyero.com – a leading Spanish property portal that publishes a Spanish Property Index - show that average asking prices fell in 2006, down by 1.6% to an average asking price of 245,000 Euros (asking prices are not the same as transaction values, which are likely to be between 5% and 30% lower in a buyer’s market). Kyero’s figures confirm the broad trends seen in the government’s data: The market is coming off the boil, and previously hot Mediterranean markets like Alicante (- 1.5%) and Malaga (+3.4%) are now struggling to deliver positive results. On the other hand the Balearics had a good year, up 15% to an average asking price of 458,800. Star performers were the provinces of Jaen (+23.2%) Seville (+17.8%), and Castellon (+16.6%). Jaen is still one of the cheapest provinces, with an average property price of 85,000 Euros, according to Kyero.com.
Interviews with property professionals in different parts of Spain lend some support to these figures, but if anything show that the government’s figures are too optimistic. Property professionals working in Malaga province on the Costa del Sol report that the overall market is tough, and prices are where they were 2 or 3 years ago. On the other hand they also report that attractive, quality property that is well priced still sells quickly. In Murcia and the Costa Blanca the story is more or less the same, though in the most over-developed areas of these regions it is increasingly difficult to describe anything as ‘attractive’.
In the Costa Brava and the Balearics, property prices still appear to be rising modestly, though properties are not selling as easily as they did 3 or 4 years ago. In Ayamonte, on the border with Portugal, off-plan investors were still driving the market in 2006, though that now appears to be cooling down. All agents, in all areas, report that demand from Spanish buyers was more robust than foreign demand, especially at the expensive end of the market.
So 2006 was a year in which the Spanish property market continued to cool down after the boom years of 2000 - 2004. Mortgage borrowing growth peaked, and foreign investment in Spanish real estate fell 12.6% (12-months to the end of October 2006), having also fallen in 2004 (-6%) and 2005 (-17%). Interest rates (Euribor) rose from 2.833% at the start of 2006, to 3.93% at the end, a 41% increase in percentage terms, adding another 1,000 Euros per annum to the costs of paying the average Spanish mortgage. Spanish property prices that have now risen on average 100% in the last 5 years, and demand, both local and foreign, is cooling in response to all these factors. As a result properties are taking longer than ever to sell, and the stock of unsold properties is increasing.
But perhaps the most alarming imbalance in the Spanish property market today is the high level of housing starts in Spain. There were approximately 800,000 housing starts in 2006, almost 3 times the EU average. Spain is Europe's biggest cement market, consuming 66 percent more than Germany, whose economy is almost three times as large. This is clearly unsustainable, and Spain’s economy has become alarmingly over-exposed to the construction sector as a consequence (50% of all Spain’s capital investment goes into real estate, which is also responsible for half of all new jobs and a sizeable chunk of both Spanish GDP and GDP growth).
If housing starts continue at this level, or even at the rate of 600,000 forecast for 2007 by the Madrid House Builders’ Association (ASPRIMA), Spain could hit a crisis of oversupply, if this is not already happening. As things stand the industry does not appear to be adjusting to cooling demand. In an unusual step the Bank of Spain has warned the property sector this February about expanding capacity and increasing borrowing at a time when demand is clearly cooling.
But despite the slowdown, it is also looks as if there are deep reserves of potential demand for Spanish (coastal) property amongst foreign buyers, principally the British and the Irish. A recent survey from the Institute for Public Policy Research shows that there are already 761,000 Brits living in Spain (990,000 if you include part-time residents), and millions more wish to join them.
The demand exists, but given a) Spain’s high property prices, b) the chance that prices might fall, and c) the stink of corruption and illegal building wafting from Spain’s property market, many potential foreign buyers are deciding to wait and see. So the problem is not the level of potential foreign demand for property in Spain, which I believe is still strong. The problem is that buyers are worried about risking their savings in a market blighted by corruption scandals, illegal building, mindless development, and dodgy property companies. It's essentially a confidence problem, not a demand problem.
One of the most important changes in the market is the fact that English-speaking buyers in general are now better informed, more aware of the common problems, and more demanding than in the past. This is a structural change that companies selling to foreigners will have to come to terms with. In the internet age, geographically dispersed buyers can share their knowledge and experiences to an extent that was not possible even 5 years ago. This has led to a power shift away from sales organisations and towards buyers.
To take advantage of the present market buyers need to be savvy, well informed, and looking for value. 2007 will be a good year for buyers who are prepared to look around, and do their research. Vendors who are serious about selling will need to drop their prices, as will developers of mediocre new developments (some of whom will run into financial difficulties this year).
2007 FORECASTS
OECDThe OECD expects a “modest correction” in Spanish property prices.
Lombard Street Research Ltd. (London)Diana Choyleva, an economist at Lombard Street Research Ltd. in London, is bearish, and predicts that the end of the housing boom will also be the end of Spain's boom. Bloomberg quotes her as saying, “You don't even need house prices to fall to have a big correction. All you need is house prices to stop growing. Most likely, things are going to begin to unravel in 2007. We've already had a slowdown in house price inflation.''
Spanish Ministry of FinancePedro Solbes – Spain’s Minister of Finance – says that Spain’s recent property price increases are “difficult to justify”, and forecasts that property inflation in Spain will fall inline with general inflation (currently 2.4%).
Economist, architect, and Spanish property expert Ricardo VergésProperty analyst Ricardo Vergés, of Spain’s association of architects, is quoted in the Spanish press as saying; “Property should cost 3 times annual salaries, not 6 or 7, as is the case in Spain today. Vergés thinks that a property crash is more likely than a soft landing.
Standard & Poor’s: International credit ratings agency Standard & Poor’s forecasts an ‘abrupt’ landing for Spain’s property market in a recent report entitled ‘Storm clouds over European Property Markets’.
Institute of Economic Studies (IEE): Given Spain’s booming economy, job creation, and increasing number of new households, the Institute of Economic Studies expects the property market to continue growing, and discounts any sudden price correction.
Caixa Catalunya: One of Spain’s largest savings banks forecasts that Spanish property prices will increase by 8% in 2007.
C.B. Richard Ellis: Real estate consultants C.B. Richard Ellis also forecast average property price increases of 8% for 2007, and do not expect property inflation to fall to general inflation levels for a couple of year yet.
BBVA: One of Spain’s largest banks forecasts that average prices will increase between 3% and 5% in 2007
The Spanish People: A survey of Spaniards by Gallup at the end of 2006 revealed that 29.4% believe property prices will increase considerably in 2007, 6% believe property prices will increase a bit, 15.2% say prices will stabilise, and only 2.3% of Spaniards believe that Spanish property prices will fall a bit or a lot in 2007.
And lastly.... For my part I’m bearish about the wider Spanish property market’s prospects for the next few years. I think that over supply, rising interest rates, scandals, and high prices will all take their toll on demand. A slowdown in the construction sector is inevitable, which could weaken Spanish economic growth significantly, and further reduce demand. As a result I believe the most likely scenario is one in which property prices in many parts of Spain stagnate this year, and stagnate or fall next year. I’ve been saying this for the last 2 years, and have been wrong the last 2 years. Sooner or later I’m going to be right.
I am more optimistic about the market for quality property in coastal areas, and other areas popular with European buyers, where demand is more diversified. I think attractive properties in good areas and on the best developments will hold their value in the short term, and deliver solid returns in the long term. But when it comes to mediocre property in over-developed areas all I can say is there is far too much of it around, and I am not optimistic about it.
Spanish Property Prices 2005 vs 2006
The following table gives average property prices by Spanish province and autonomous region for 2005 and 2006 in €/m2, and property inflation rates in 2006. Coastal regions popular with European buyers are highlighted.
Source: Spanish Ministry of Housing
© Mark Stucklin (Spanish Property Insight)
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