Property Prices to Keep Falling, Though Less Abruptly

19/08/2014 – Expansion

In 2006, when the grandness of a man was measured in the scope of owned property, that-time president of developers, Guillermo Chicote, said: ´home prices will never go down´. Two years later, they did. Then, he forecasted: ´we shall not expect them to fall more than 40%´. Neither this prophecy came true. In 2014, the values have already dipped down by 40%.

It may seem premature, however, to tell the prices have bottomed out. As the realtors and the property analysts claim, home values are going to fall further but their slump will not be as sharp as it has been until now.

In fact, Standard & Poor´s rating agency assures that Spain will be the only European country to miss a rise in prices which will not be noticeable till 2016. Precisely, the U.S. firm says an average price of a Spanish property will depreciate by 2% in 2014, stagnate thoughout the year 2015 and rebounce 2% in 2016.

´Currently, we observe an improvement in home sales but there is no point in waiting for the prices to rise´, says José García Montalvo, professor of Economics at the Pompeu Fabra University. ´The prices are volatile: some months will see bigger falls, some smaller. Local analysis will be essential for understanding the national real estate market´, Julio Gil, the Horizon´s head, adds.

One factor pulls the values down even more: the cash purchases. García Montalvo assures that 60% to 65% transactions were sealed on with cash. According to the Instituto de Practica Empresarial (or the IPE, a Madri-based business school specialized in the real estate field), they account for 66% of all deals. Naturally, purchased homes are usually very cheap.

Moreover, the prices of land (90% provisioned) are expected to decrease as today they find no buyer.

In opinion of Ángel Serrano, CEO at Aguirre Newman, the sector will approach ´healthier figures´ soon, marking the true recovery.


Original article: Expansión (by J. M. L.)

Translation: AURA REE