TINSA House Price Index October 2009
November 12th, 2009
Many people have trouble making sense of and interpreting the TINSA numbers. Here’s why I think some of them are more useful than others.
The TINSA Spanish Property Index was updated and published recently.
TINSA calculates a number to represent the overall value of the properties which they have valued – that’s what the TINSA index is: a single number which represents the relative value of the Spanish property market at a particular snapshot in time.
An example.
In October 2007 when the TINSA index stood at 2265, let’s say the market price for a particular property was €200,00. Now with the TINSA index at 1960, that same property would be valued at 13.4% less, or €173,000 (200000-(((2265-1960)/2265)*200000)).
The weakness in the TINSA methodology is that their index is based on valuations, not actual sales values. However, in a property market where the official data is also based on valuations or inaccurate transaction prices, I rate the TINSA data as the most reliable guide available.
In my opinion, the government valuers are certainly guilty of valuing according to the government’s agenda – rather than as an accurate reflection of reality.
The government record of house price transactions does not take into account the cash that still passes ‘under the table’. As this black-market facet has been slowly eroded over the past few years, transaction prices appear to have increased when, in reality, more of the ‘real’ price is being declared.
How much of an error could this cause in the government data? It was not uncommon a few years ago for 40% or 50% of a house purchase to be paid in cash. Today, many of those deals have been eradicated or drastically reduced – causing an apparent ‘increase’ in house prices of perhaps 30-40% – enough to completely mask the actual reduction in real-world house prices.
The reason I rate the TINSA data above those government sources is that they tally very well with what we actually observe to be happening in the market – something which none of the other data can claim.
In summary, the TINSA data suggests that Spanish property values are still falling, although that fall has slowed in recent months.
The more confusing part of the TINSA data is reflected in this graph showing year on year changes to their index.
This graph shows the rate of change in the index, not the actual trend of the index. The fact that the line on the graph has risen over the last few months is an indication that the rate of decline in prices is slowing – not that prices are increasing again.
However, as an indication of trends, this upturn is encouraging because it says that the decline in prices is slowing – again consistent with what we see happening in the real world.
Finally, the TINSA breakdown of index activity by region is not terribly useful because there isn’t that much difference between areas.
Despite the inherent weakness of being a valuation-based price index, the TINSA index is the best we’ve got, it closely correlates with reality and, if you ignore some of the extra fluff in the report, it is a useful measure of the Spanish property market.
Martin Dell, Kyero.com
Related Posts
- Tinsa Spanish House Price Index March 2009
- TINSA House Price Index May 2009
- TINSA House Price Index June 2009
