Property Prices Will Continue to Fall, Says Bankinter
November 16th, 2011
According to Bankinter’s latest report on the housing market in Spain, housing prices will fall an additional 6% up to the end of 2013, making an adjustment of 30% in real terms from their peak, and only begin to rise again in early 2014, when the economy is capable of generating employment and demand recovers.
With regard to their forecast made last April, the financial institution have deferred for a year the adjustment in the housing sector, saying that promoter activity will not take off until the last quarter of 2014, when the housing ‘stock’ will have reduced to below the 500,000 mark.
Until then, only discounts and minimum production, will “very slowly” digest a ‘stock’ of houses which now stands at, they estimate, between 850,000 and 900,000 homes, of which about 200,000 or 250,000 belong to financial institutions. Bankinter sees the two years ahead with demand at minimum levels because of high rates of unemployment, which in 2011 alone saw home sales plunge to around 200,000 new properties, which was 55% less than what was sold in 2007, the year with the highest recorded demand in history (412,000 homes).
Bankinter’s calculations suggest that the Spanish economy will grow 0.7% in 2011 – half of what the Government anticipated – 1.2% in 2012 and 1.6% in 2013, below the 2% needed to create jobs, reported Cinco Dias.
In parallel, the developers will adjust their production to a record low of between 90,000 and 100,000 homes in 2012, when finished properties will number between 100,000 and 120,000.
With regard to the data for supply and demand, Bankinter said that “the consumption of the housing ‘stock’ in the coming years will not be the result of a surge in purchases, but should be attributed to the dramatic adjustment in construction activity”.
On the other hand, Bankinter said the other big problem in the real estate sector is the lack of credit, because the difficulty of accessing wholesale funding in the middle of the debt crisis forces banks to be more selective with their customers, and Bankinter admits that “financial institutions that have a significant weight of credit to developers on their balance sheets tend to offer favourable financing conditions only for the purchase of homes listed on their asset portfolios, which then makes it more difficult for customers to obtain funding for other home purchases.”
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