Spanish House Prices: More Room to Fall
April 6th, 2010
Despite indications that the decline in Spanish house prices is slowing, most experts say there is room for further falls.
With an estimated 1m unsold or unfinished residential Spanish properties when the housing bubble burst in 2007, many say the price adjustment could take another two or three years to play out.
Banks, which have acquired billions of euros worth of residential and commercial stock through foreclosure, debt-for-equity or debt-for-asset swaps with developers, are doing their bit. Lenders such as Santander and Banesto have unloaded hundreds of homes by offering discounts of up to 40 per cent.
On Spain’s overbuilt Mediterranean coast, heavy price reductions have also started to revive interest among Britons and other northern Europeans looking for holiday homes or second residences.
Stephen Newman, chairman of property services group Aguirre Newman in Madrid, divides oversupply into three categories.
“First you have the residential units that have been completed and are empty but close to major cities,” he says.
“With these, it’s simply a question of patience and price adjustment and within 18 months to three years most of that stock will have been absorbed.
“Then you have the second category of residential units that have been completed in what are probably absurd locations – these properties represent a major headache for the banks which are forced to take them on.”
The third category – land – is another asset with sharply differing value according to zoning classification, location and state of readiness for development, according to Mr Newman.
Frédéric Mangeant, head of Knight Frank in Madrid, says developers have begun dusting off plans for small upscale housing estates on the capital’s periphery.
“There is a tendency to think that there is a big problem of oversupply,” he says. “This is true, but not in all zones and all categories.”
Second-hand homes in sought-after areas around the country have also resisted sharp price corrections, say property agents.
Story from Financial Times (subscription)
Related Posts
- Spanish Property Prices Must Fall by 23%
- Spanish Property Prices: Further to Fall
- Spanish Property Prices Continue to Fall
I cannot help thinking that the thrust of this report is largely correct – the ‘fat lady has yet to stop singing’ in terms of Spanish property prices. I am also tired of reading that there are some 1 million homes for sale in Spain. There are not. There are around 1 million newly built properties for sale and probably (no-one really knows!) around 1 million further re-sales for sale. This is a vast over supply that will (sadly) take years to absorb. Some segments of the market may now be yielding reasonable value but large segments of the market (normally those of little or no interest to foreign buyers) are virtually unsaleable.
The market place is far from simple – with additional volatility having been created by the (necessary) actions of horrendously overextended Spanish banks dumping property onto the market – and the collapse of Sterling. This has resulted in a tricky market for buyers that requires real care, if a long term, secure investment is to be made.