16 September 2015 – El Confidencial
We are clearly living in a skewed market. The experts in the sector have been saying as much for several months now and the various sets of data being published about the housing market in Spain tell the same story week in week out.
Just one week ago, the House Price Index (IPV) published by the National Institute of Statistics (INE) showed a 4% YoY increase in house prices in Q2 2015. That percentage raised alarm bells as it fuelled fears that the market may be overheating again. Today, data from the Ministry of Development shows an increase of 1.2% during the second quarter of the year compared with the same period last year, a more moderate rise than reported by INE.
Now, to cool tempers, data from the notaries reflects exactly the opposite, a YoY decrease of 2.4%, taking the average price per m2 to €1,247. According to the General Council of Notaries, this decrease is due to a 3.1% YoY fall in flat (apartment) prices, meanwhile family homes experienced an increase of 3.4%. Moreover, these latest statistics reflect important differences between the prices of second-hand homes and new properties, with a decrease of 4.5% and an increase of 9.4%, respectively.
Which data is most reliable?
According to INE, “All of the parameters relating to property prices are skewed, the market is not yet operating with any kind of normality”. As such, any figures that are published should be interpreted with caution.
In terms of statistics, rather than depending on one official set of data as an indisputable reference, we are faced with multiple reports that only serve to generate confusion and contradictions. At the state level, for example, we have data from the Ministry of Development and INE, meanwhile the notaries and registrars supply their own data to the market, and so do the appraisers and real estate websites.
All of these reports are prepared on the basis of different methodologies. In this way, the data published by the Association of Registrars differs from that released by INE and again from that supplied by the notaries. The first group publish data with a delay of two or three months, i.e. they release information about prices and transactions signed before notaries two or three months earlier. Therefore, they do not really show the increase or decrease in prices in a given month, but rather what happened in the market several months ago. By contrast, the data issued by the notaries is more or less published in real time. As such, the statistics generally do not reconcile with each other. However, if instead of looking at the exact figures or percentages, we focus on their evolution over time, all of the indicators seem to be telling the same story – the market is stabilising.
That is because we find ourselves in a market that has now emerged from the emergency room, although it is still in need of professional care. In other words, the market has not been discharged from hospital yet and it will take months, if not years, for it to return to any kind of normality.
That is mainly because we are starting from a position of historical lows in terms of sales, mortgages and the construction of new homes; therefore any upwards movement may distort the figures. As a result, it is not surprising that we are talking about increases in terms of sales and the granting of mortgages at rates exceeding double figures. We are starting from zero and therefore any upwards movement distorts the percentages.
Furthermore, we should not forget that we are dealing with a very heterogeneous market. The level of activity is not the same in Madrid as in Albacete, nor is it the same in the neighbourhood of Salamanca as in Usera. Clearly, prices and the market in general will begin their recovery in those areas in which demand is highest and supply is scarce.
Original story: El Confidencial (by Elena Sanz)
Translation: Carmel Drake