House Stocks Decrease Most Where GDP Growth Is Strongest

25 March 2015 – Cinco Días

Since the burst of the (property) bubble and the subsequent closure of the credit tap, experts in the real estate sector have said that until the employment situation improves and access to financing is relaxed, house purchases will not regain the vigour they once enjoyed.

Seven years after the longest and deepest crisis in this sector in living memory, and just when some regions are beginning to see positive growth, both in terms of house prices and sales, we are seeing that those analysts were right all along.

The Spanish Confederation of the Construction Product Manufacturers Association (Cepco) estimates that 439,617 homes were left unsold and unlet at the end of last year, i.e. 36.26% fewer than the figure in 2009 (689,787) (we should note that the volume of total stock peaked in 2010 at 692,560 homes and has decreased since then).


However, this significant reduction in stock, most of which has taken place in the last two years, has not been uniform across the different autonomous regions and, interestingly, has not been determined by the behaviour of prices in each region, but instead by the recovery in economic activity.

Thus, based on data from Cepco and calculations carried out by Cinco Días, the five regions where the stock of new homes decreased the most between 2009 and the third quarter of last year (the latest data available with this level of granularity) are: Navarra, Cantabria, Extremadura, the Canary Islands and Madrid, with decreases ranging from 93.02% in the case of the former, to 45.10% in the case of the latter.

And, in parallel, where have the prices of newly built houses decreased the most? According to statistics compiled by the Ministry of Development based on data from appraisal companies, the five regions where new properties have most decreased in price are: Murcia, Aragón, Valencia, Castilla-La Mancha and Andalucía. On this occasion, the cumulative declines range between 44.46% in the case of the former and 33.05% in the case of the latter.

In fact, house prices are currently equivalent to average values last seen between the end of 2003 and the beginning of 2004; and according to the experts, in some cases, these prices still have further to fall. There is no relationship between these two variables. However, the situation is different if we look at economic growth data.

Although the first official accounting figures by region are not yet available (INE is due to publish them next Friday), the numbers prepared by Hispalink indicate that the five communities that recorded the highest GDP growth rates last year were: the Canary Islands, Madrid, Navarra, Cataluña, and Valencia.

On this occasion, there is a correlation in the case of three regions where house stocks have decreased the most, which shows that, in fact, economic growth is a stronger driver of house sales, including those sold from stock, than the evolution of prices. And (the relationship is proportional): the stronger the recovery, the better.

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake