In Reality, Spanish Property Value Dropped 58.61% Between 2007 & 2014

9/10/2014 – Inmodiario

Since the 2006-2007 peaks, Spanish real estate depreciated by 58.61% in nominal terms. The percentage is much higher than the figure published by the Ministry of Public Works, 31.51%, which was estimated on basis of property appraisal values. This correction was included in a report on the first half of 2014 drafted by Tecnocasa and the Pompeu Fabra University in Barcelona.

According to other sources, the drop-off showed 43.89% (Tinsa) and all agree that presently, housing prices in Spain stand at the 2004 (and earlier) levels with the adjustment process at the verge of concluding. In fact, over the last 12 months, the slump slowed down, demand for long-term investment increased and many transactions have been sealed in cash.

Previous experience with housing price corrections indicates that values use to overreact 10% down before a turn in tendency occurs. In accordance with the opinion of analysts from the OECD and The Economist who maintain that Spain is among the countries where property is overvalued (between 5% and 8%), still the prices will go down by 15%.

Moreover, the positive news about constantly increasing real estate sales in the first quarter of 2014 (50% more) have been triggered by extremely low performance a year before when the tax relief for property purchase was abolished.

In fact, the number of deals sealed in the first quarter (81.358 sold properties) is greater than Q1 2013, 2012 and 2011 only. Today’s real estate sales represent a mere 34% of the total of purchases in 2006, while mortgage approvals only 20% of that figures.

Next indicator speaking against the recovery is the number of foreclosures. In the last year, there were 81.971 cases of seizure, by 8% more than a year earlier. Specifically, main residence foreclosures rose by 19.1% if compared to the fourth quarter of 2013 and declined by 4.2% year-on-year. Mostly rented homes are being foreclosed.

Speaking of rentals, investors see a certain appeal in attractive yields on buildings in main cities where the circumstances are expected to improve and the prices rise.

Original article: Inmodiario

Translation: AURA REE

40