ST: Some House Prices Still Need To Fall By 15-20%

28 September 2015 – Cinco Días

Is it compatible to say that the market is moving towards stabilisation and at the same time that the prices of some homes still need to decrease by a further 15% to 20%? Most of the experts and the CEO of Sociedad de Tasación, Juan Fernández-Aceytuno (pictured above), think so. They argue that those two facts can coexist in time and that they show that the real estate market is slowly emerging from the worst crisis in its recent history.

“We are currently undergoing a period of stability, not recovery”, said Fernández-Aceytuno last week during the presentation of his appraisal company’s latest report, prepared in conjunction with Planner, which outlines the new profile of the home buyers attending events such as SIMA in Madrid. The Head of Sociedad de Tasación explained that there is still some way to go in terms of what needs to happen from now on for us to be able to speak more openly about a recovery in the market.

Greater confidence

Given the evolution of appraisal market, Fernández-Aceytuno considers that there are still many places where house prices need to decrease by a further 15% to 20% for the supply to match up with the demand. In fact, he points out that we can only talk about a recovery in a handful of regions, where sales now significantly exceed the levels recorded a year ago and where new developments are being constructed once again.

Moreover, he said that the improvement in the market for the securitisation of mortgage loans must continue following the first operation (for several years) signed in June, and that the growth in employment, household income and GDP must all strengthen. “All of the ingredients are present for demand to react. What is happening now is that an increased level of confidence is being demanded, investors are being more prudent and potential buyers have realised that investments in housing are not infallible”, said Fernández-Aceytuno.

In this sense, he commented that we cannot talk about a full recovery yet in a market in which the transactions being conducted by foreign investors and buyers carry a greater weight than those being undertaken by first time buyers, as a result of the creation of households, or those that want to acquire better homes (as corroborated by Solvia’s study published on Tuesday). How long do we have to wait for this recovery then? “It is impossible to say, but it will take years, not months”, concluded the CEO of the appraisal company.

Meanwhile, the report prepared by Planner and Sociedad de Tasación, which analyses the profile of potential buyers attending real estate fairs, such as SIMA, reveals that the typical profile is younger (aged between 25 and 35), with greater confidence in the future, with larger budgets and looking for larger homes, according to the CEO of Planner Exhibitions, Eloy Bohúa.

According to the report, in parallel, there has been an increase in the number of older buyers whose main motivation is to improve their current home or to move from rented housing to their own home.

Some of the impediments that prevent the closure of more operations include, in order of importance: price, financing (a lack of it) and uncertainty regarding employment conditions.

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake