Houses Worth 66% More Than in 2001
January 15th, 2013
The sharp decline experienced in housing prices since early 2008, estimated by experts to be more than 30% on average, has not prevented the value of homes being much higher today than in 2001. According to an analysis by the independent value experts, Euroval, from the official Ministry of Development data, the cost per square metre of private housing in 2012 is 66.2% higher (1,607 euros) than that recorded 11 years ago (771 euros), a figure which virtually doubles the increase registered by the Consumer Price Index (CPI) in the same period, of 35.8%.
This increase in housing prices differs greatly depending on the autonomous region. Prices in Murcia and Andalusia shot up by 75% and 74.8%, respectively, while housing today in Navarra has only increased by 22.2% since more than a decade ago, and in the Canary Islands by 27.9%. It seems that the boom (2004 to 2007) had lesser impact in these latter two regions. In Madrid, prices are 47.5% higher and in Catalonia they have increased by 55.1%.
In addition, the average figure of 66.2% almost doubles the increase in the overall CPI from November 2001 to November 2012. According to this index, the cost of living rose by 35.8% in 11 years, which is well below the increase in house prices, despite their tough adjustment in recent years. Specifically, if house prices had increased at the same rate as other goods, then the price per square metre of private housing today would cost an average of 1,048 euros.
Euroval notes that “although these increases are higher than the growth of the gross domestic product of the economy at that time, it is little consolation for the brutal market decline in general over all regions.” In this sense, the appraiser states that the measures, mainly financial, taken by the Government “have created uncertainty in the real estate market” bringing with it “a gradual reduction in prices.”
Regarding the implementation of the ‘bad bank’, Euroval believes that the creation of Sareb in the autumn “further reinforced the idea that they were moving towards a liquidation of real estate, causing a fall in demand, barely offset by the irrational incentive that in January 2013 they were to raise VAT and eliminate the tax deduction for home purchases”.
El Mundo reported that, with regard to the sale of homes, the appraiser recalled how between 2004 and 2007 the market for new houses registered a “very strong increase” even equaling the second hand market. 2006 was notable among these years, when Spain signed nearly one million housing transactions. Now, looking at the present and the future, Euroval points out that the number of purchases of new homes are again well below that of transactions on second hand homes (220,000 for 100,000 approximately), saying “It remains stagnant and, although there was a surge in the last quarter of 2012 for tax reasons, even falls below the volume of purchases made in this market in 2011.”
Also in their analysis Euroval says that “new building permits are at levels never seen before, with falls of 80% compared to 2001″. Specifically, according to one of the appraiser’s tables, residential construction has fallen by 93.6% in Valencia, followed by 93.5% in Murcia and 92% in the Canary Islands. “Spain at present has only about 15% of the projects they had 11 years ago (over 500,000 in 2001 and 50,000 in 2012). These plummeting figures are extremely serious considering the importance of the sector,” Euroval concluded.