Spanish Property Prices Levelling Out
August 17th, 2006
Analysts foresee a much-needed stop to rising property costs in Spain. The rising prices of property in Spain finally appear to be levelling out after experts predicted a moderate increase in housing costs of 9 per cent for 2006.
Unfortunately, for young people and immigrants with low incomes, this figure is only applicable to homes with a cost between 500,000 and 600,000 euros.
Although a corresponding levelling-out of housing costs is also expected to occur for lower-priced homes, it remains unclear when exactly it might take place; this will depend heavily on interest rates and the overall development of the economy.
According to Tasamadrid, a property company in Spain, the controversial Ley de Suelo won’t have a short-term effect on property values.
This newly-drafted land legislation requires a 25 per cent reduction in regular developments in favor of government-protected homes, a requirement that has created widespread expectation of rising market prices.
Tasamadrid asserts that such an increase will not take place. Instead, agents will seek out cheaper property to compensate for the construction of fewer developments, thus causing a drop in gross prices per square meter. Housing costs would not then be affected by the regulatory changes required by the new land legislation.
These predictions suggest that a market where VPO’s (cost-regulated homes offered by the government to people of limited incomes) play an increased role may in fact be viable, as long as their final prices allow for profits on the side of contractors.
Besides benefitting young people and immigrants in search of affordable housing, this market model might even increase the profit margins of contractors, since building larger numbers of government-assisted homes would entail focusing on an essentially risk-free market.
