The Truth About the Spanish Property Price Crash
May 29th, 2007
In the UK, we take the reliable and accurate house price index from the Land Registry for granted. In Spain, such information is not available – and the information which is published from ‘official’ sources is inaccurate and unreliable.
Even worse, the majority of speculation of a house price crash in Spain is based on misleading information published by the Spanish Ministry of Housing (Ministerio de Vivienda).
The Ministry of Housing figures for price per square metre of housing, although widely adopted as gospel are misleading for 3 reasons:
- There is no standard method of measuring floor areas – different handling of terraces, communal areas and stairways can skew the floor area of a property by 50%
- The official sales price of a property does not account for the cash which passes directly from buyer to seller. This has always been common practice in Spain and, although now on the decrease, can skew price trends by a further 30%
- The Spanish postcode system is hundreds of times less accurate than the UK system. In London, 10 houses share the same postcode, in Madrid it’s 1,500. Outside of major Spanish cities, a single postcode can cover several towns and villages. Even if the MVIV price per square metre was otherwise reliable, it cannot accurately reflect trends within a city or town
It’s highly likely that the Ministry of Housing figures could be up to 80% inaccurate. Worse, there’s no way of knowing which of their figures are accurate or skewed. Compared to the statistics from the UK Land Registry, those from the Spanish Ministry of Housing are, quite simply, useless.
The MVIV statistics say that house prices have continued to grow by 10-15% per annum but are now showing signs of slowing. Speculation of a house price crash is based on these figures and the fear that continued house price growth in the future is uncertain and unsustainable.
Kyero.com Spanish House Price Index
To help UK buyers to understand the Spanish property market, Kyero.com has been recording actual asking prices of 80,000 properties for sale in Spain from 600 estate agents since 2003.
The Kyero.com Spanish House Price Index is updated every month and is available as a free download from this page.
This information is automatically groomed to make it more reliable and practical by removing unusual properties from the calculations. What’s more, any analysis of asking prices will naturally predict actual sales values by 3-6 months.
According to the Kyero.com Spanish House Price Index, there has been no sign of a crash having occurred nor of one being imminent. On the contrary, Kyero.com says that the end of the boom predicted by the MVIV figures has already occurred over the past two years.
Far from an imminent crash, the Spanish property market has already experienced a soft landing with prices growing at the rate of inflation for the past two years.
Using more reliable/real world statistics is the key to seeing that the rumours of a crash are unfounded.
Smart buyers can profit from doing their own research and buy when less well-informed homeowners are selling.
Because of all the ‘Crash’ scare-mongering, it’s definitely a buyers market in Spain at the moment – particularly in areas experiencing a temporary glut of new-build properties.
There are still opportunities for bargains on all of the traditional costas as well as inland and in the northern provinces.
Although it’s unlikely that the double-digit gains of previous years will be achievable in the near future, the Spanish property market is stable and healthy.
8 Tips for Buyers
- Do your own research and background reading BEFORE even thinking of purchasing in Spain
- Read this independent review of the Ministry of Housing figures
- Keep an eye on the free Kyero.com Spanish House Price Index
- Visit Spain independently and have a look around
- Take your time and have realistic expectations
- Remember that making a mistake can be costly.
You need a 20% increase in house prices to cover the cost of buying and selling. - Never be tempted to buy when the paperwork isn’t 100% in order
- Always use an independent lawyer
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