Spanish Property Market Summary
July 11th, 2010
Download a new report about the current state of the Spanish property market analyses the three main sources of available information – official data, valuation companies and property portals.
Between these three categories, we review 14 separate reports and summarise how each documents the highs and lows of the Spanish property market, as well as the pros and cons of each report.
Overview
The earliest peak of the Spanish property market was signalled by a record number of property transactions in Q1 2006 according to the College of Registrars.
The latest peak was recorded by the Ministry of Housing in Q1 2008, measuring average price per square metre and their internal index. It’s interesting to note that two sources of official data should differ by two years.
When it comes to market lows, almost all sources agree that it either happened early in 2009 when looking at the number of property transactions, or is still going on when looking at any other measurement.
The stand-out figure, and the one that is the most reliable of all quoted here, is that the number of property transactions has fallen approximately 56% from peak to trough.
The Spanish property market, like any other, has seasonal variations so it’s important to compare similar parts of the year when looking at transaction volumes.
In this regard there may be a slight ray of hope. The College of Registrars and the Ministry of Housing both recorded a slight improvement for Q1 2010 over Q1 2009 – indicating that more properties are changing hands now and that market activity may already be increasing.
What remains very much in doubt is at what price level those increased property transactions are taking place. The most pessimistic set of figures from Idealista indicates that prices are down, on average, by 23.7% from their peak – and they’re still falling.
The most optimistic figures range from a drop of 7% to around 12% – all clearly ludicrous, based on personal experience and market hearsay.
The two largest Spanish property portals have access to the most data and the largest sample sizes. Their data indicates an average price drop of around 22% peak to trough. As an average across all areas of Spain and across all property types (both desirable and less so), this seems to be a fair indication of reality.
The valuation companies are a little more cautious with an average decline of around 15% which, I think, is bordering on optimism.
Given that the number of property transactions is down by around 56%, it’s difficult to see how prices could NOT have slumped by at least 20% as motivated sellers undercut each other to appeal to a reduced number of buyers.
Conclusion
What’s frustrating is that every data source has it’s weaknesses and none tells the whole story. While this report summarises each of the reports which are publicly available, the reason that so many sources exist is because the official data is so sadly lacking.
What the market needs is for the Spanish government to publish actual transaction prices of individual properties so that the ‘hard facts’ are available for further analysis. While this will not reveal the ‘actual’ price paid for the property in most cases – thanks to a cash element of many property transactions – it will level the playing field.
My own belief is that when property buyers are armed with better data, they make better buying decisions. When that data is lacking or incomplete, they either make sub-optimal decisions or they decide not to buy at all. This lack of data transparency, in my opinion, is a significant factor in the continued suppression of the Spanish property market.
Martin Dell, Kyero.com
Related posts:
- 2007 Spanish Property Summary
- Spanish Property Prices Under the Microscope
- Finally, Realistic Spanish Property Trends
Excellent review as always. Despite the frustrating lack of solid evidence I like the way you cut through the uncertainty and give an honest interpretation of the ‘known’ facts. As a potential buyer in the Spanish market I find the updates interesting and useful.
In Global terms it would seem to me that the key information for a period of several years, quarterly is required ie housing stock both finished and unfinished and the number of sales completed. In simple terms, a normal stock control calculation. Most Economists accept the undisputed link between supply and demand. The difficulty appears to be getting reliable information.
I am looking to buy in Madrid where I live. Not to benefit from others doom – but shouldn’t the disparity between value and reported prices vs. actual sale prices benefit my mortgage situation. IE if I get a seller who advertises at 500,000 to sell at 450,000 isnt the valoracion most likely to be above the 500,000 say 550,000 meaning my 80% of value mortgage will give me 440,000 meaning I need 10,000 + the approx 45,000 in taxes and fees to buy the property?
The problem here is owner set pricing rather than realistic sales prices, so a bank’s valuation isn’t likely to tie up with the owner’s asking price, especially at the moment. i.e. If they ask 500, take 450 and a bank values it at 400 …