Buying a property today is 39% cheaper than six years ago

House PricesAccording to Premier Marbella news sources, it is six years since the price of second-hand property in Spain reached its maximum values. In April 2007 it stood at € 2,952 / m² and since then has not stopped falling. There are already 73 months of declines in prices to € 1,794 / m² which is the value it stood at in May, according to data analyzed by the IESE business school. Leading Marbella property specialist Romano Keogh is confident that this news will animate overseas buyers to invest in a property in Marbella.

BBVA estimates that the oversupply of housing will decrease modestly in 2013

BBVA ‘Research’ believes that the huge stock of homes for sale in Spain will be reduced “modestly” this year, in the wake of 2012. However, it considers that the adjustment for the supply side has been “significant”, and could be close to an end as a result of the “strong” reduction in the number of new housing projects and employment in this sector. BBVA finds a “strong” dynamics in housing demand by foreigners and believes that it could be further strengthened this year, “once the uncertainty in financial markets has dropped and the will be a greater appetite for risk”.

However, the bank president Francisco Gonzalez adds that these factors do not mean that in the coming years there will be a “vigorous” investment recovery, as the cumulative oversupply remains important “but that adjustment is being corrected”. In fact, residential investment is estimated to contract by around 8.3% in 2013. According to the banks estimates, it will be from 2014 when the market begins to record positive growth rates but moderate (+2.1% for the full year), after seven years of declines and a cumulative contraction of over 50%. BBVA also indicates that the real estate industry will face new circumstances that will add uncertainty such as the restructuring of the financial system, the implementation of the Sareb, eliminating tax breaks for the purchase and the increase in VAT on housing reform tenancies Act and the new regulations for Socimi.

Spain’s Housing Stock Depreciated 1.1 Billion Euros in 4 Years

The Spanish housing stock has depreciated 1.1 billion euros in the last four years, from 5,713 billion euros to 4,600.9 billion euros, or 19.5% less, and, according to a study by the appraiser Euroval, in this period the net balance of housing has increased by one million units. The report reveals that in this period the housing stock has increased by 4% and its value has been reduced by 20%, with Madrid being the region where housing has depreciated most (by 25%), and Extremadura where it has depreciated least (by 7.4 %).

According to the study, between 2011 and 2012, Spanish properties as a whole have depreciated by 7.42%. “Housing wealth is very relevant to economic decision-making and affects the capacity for borrowing, saving and consumption,” the report says. The equity increase in Spain is not mainly due to the number of dwellings, but the prices, because the value grew annually at rates in excess of 20%, while the number of dwellings grew at a similar figure (24%) for the entire decade. The sale of homes was down 11.3% in 2012. However, this figure rose year on year in December after three consecutive months of falls. According to figures from the National Statistics Institute (INE), achieved sales transactions in the last month of the year reached 23,523 units which was up 2.3% on the same period last year. Records are based on statistics from the Property Registry Office.

Prices correct the overvaluation of the past decade

The evolution of housing prices in the last ten years has been very similar to the cost of living, around 30%. Thus, between 2002 and 2007 the average house price recorded a rise of 74% while the Consumer Price Index (CPI) stood at just over 17%. However, between 2008 and 2012 the behavior of these variables has been the opposite. While the (CPI) continued to rebound at about 11%, while the average price of apartments fell by 25%.

During the first five years the value of property rose nearly 4.5 times that of the cost of living. While during the next five years there was a correction in house prices which has resulted in values being much more correlated with the cost of living. According to data from the Ministry of Development, Unions and the National Statistics Institute (INE), housing prices clearly rose approximately 27% above inflation and wages since 1997.

TINSA gives a fall in house prices of 11.3% in 2012

Homes are now worth 11.3% less than a year ago and are overall 25% lower than in 2009. The property appraisals produced by Tinsa are testimony to this. The fall in house prices in Spain during 2012 were the largest annual drop in its recent history, falling 4 points more than one year ago when they fell by 8.1% and almost double over the last two years thus accumulating a drop of 38.4% from December 2007.

The square meter values are priced at 1.571€ today compared with 2.168 € five years ago. Yet this fall recorded by property valuation professionals cannot be criticized as excessive when compared to the average drops of 50% in countries like the U.S., UK or Ireland which also occurred in much less time demonstrating the rigidity of Spanish residential market which has remained artificially high in recent years.

This year the price drop has been particularly high in cities registering – 14% and in metropolitan areas – 13.7%. Also above the average fall rates are the Mediterranean coastal areas, which fell 12.5%. In contrast the price drop was lower in smaller municipalities at -7.7%, the Canary Islands and Balearic Islands  -6.6%.