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The “bubble” of housing prices ends up without air

The trail of the “bubble” of housing prices in Spain is lost after five years of a tough adjustment. According to the Organization for Cooperation and Economic Development (OCED), the current overvaluation of homes in Spain reaches only 11,5%, very far from the 44% reached in the year 2009.

This percentage of 11,5% leaves Spanish homes in the eleventh position in the ranking of the most “inflated” ones in the developed countries (…)

The current overvaluation of Spanish homes is far from the disproportionate percentages published by the OCED in its reports from 2007 and 2009. It talked then of 44% and 30%, respectively. There is no doubt that the sales of the last few years have reduced these numbers. In 2009, Spain was in the second position in this ranking, only behind Holland, with 54%.

(…) The OCED makes its calculations  based on a double ratio and its corresponding average: yield of the lease and salaries. In the case of Spain, selling prices over earnings from rentals are inflated in 8% and 15% over salaries. (…)

The international organization also divides the countries and published figures in five groups, placing Spain in the fourth, “where homes are overvalued, but prices are sinking. The OCED explains that “this category is the biggest one as it includes many European countries where the adjustment is still taking place”. And it stands out: “The most important one, Spain”. United Kingdom, Belgium, Denmark, Finland, Netherlands and Australia are also included in this group. And it warns: “While the corrections of prices are necessary in these countries, the financial health of the real estate market weakens and potentially its banking sector will be more fragile.” (…)