Housing prices have still a long way downwards ahead. The risk agency Standard & Poor´s considers there will an adjustment of 20% based on the ratios “price-revenue” and “price-rent”. Its forecast is in line with those published this weekend by The Economist, which considers that prices in Spain are overvalued by 20%.
The agency foresees that the nominal price of properties in Spain has dropped by 7,8% this year and another 6% in 2014, and therefore does not predict improvement signals in the real estate market on the short term in view of the high number of assets pending to be sold.
In a report on the residential sector in Spain, the company believes that four years will be needed before Spain achieves a balance between the offer and the demand of real estate assets.
In fact, the recession in Europe is pushing down real estate prices in most markets, which means that in Spain, along with the increase in unemployment, the tax consolidation and the tensions in the financial markets, the recovery of the residential real estate market is still far away.
The firm, as well as The Economist, indicates that Spain is still affected by an excess offer of assets with an estimated number of unsold properties of 700.000.
According to the Financial Sector Evaluation Program of the IMF, the real estate stock will reach one million properties this year.
Even though interest rates have been reduced, the growth of mortgage loans is diminishing. The agency also stresses the recent liquidity injection in Spanish banks, the disinvestment of financial institutions in real estate assets and the subsequent decrease of prices this year.
In a scenario very much affected by the precarious Spanish labor market conditions, Standard & Poor´s claims that, even though the debt rate of Spanish families is decreasing, the deleverage process will be slow.
In view of the correlation of the real estate offer and demand in Spain, the agency believes that there could be a certain degree of overvaluation of the real estate assets before prices reach an equilibrium.
The forecast of Standard & Poor´s join those made by other experts. The consulting agency R.R. de Acuña & Asociados are more aggressive as they believe that the price of properties will face a drop of 30% or even more during the next five years -between 2013 and 2018-. Fitch, on the other hand, published a few days ago a report which foresees an additional drop of 15%. Arcano Capital mentions a correction of 10% during 2013, while there are no figures from the Spanish National Mortgage Association, although there is talk of reaching the minimum level this year.
Source: El Confidencial