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A recent publication claims that the property market could still drop further. After five years of double-dip recession, Spain’s economy seems to have stopped sinking. But the recovery will be a prolonged one. Despite having fallen almost 40 percent since the housing bubble burst in late 2007, home prices in the euro zone’s fourth-largest economy are expected to drop by another 10 percent to 15 percent before they stabilize. “Recovery in the housing sector in Spain hinges on an improvement in employment and access to credit, both of which are prey to uncertainty,” Souheir Asba, an analyst at Societe Generale, said in a note. Here are the reasons why Asba thinks Spain’s property market has yet to hit the bottom.
1. No significant investment in housing.
While a recent trend indicates an improved appetite for distressed Spanish real estate assets, it’s not significant enough to call for a revival of the market.
2. Flat household income prospects despite GDP growth.
Spain has finally overcome a slump triggered by the end of the real estate boom. The country emerged from recession in the third quarter of last year and its economy expanded 0.3 percent in the final three months of 2013, the fastest rate of quarterly growth in almost six years. The Spanish government expects gross domestic product to grow by about 0.7 percent this year, and for job growth to resume in the second or third quarter. The fact that investors are once again buying up Spanish government bonds is a big vote of confidence. As a result, the government is now paying much lower interest rates to borrow money. Yields on 10-year treasury bonds are down to 2006 levels.
On Jan. 23, Spain became the second euro zone country to exit its international bailout program, after Ireland. Spain saw a meaningful pickup in exports last year, but the housing and construction sectors are still lagging behind. For one, Asba pointed out that the unemployment rate is still too high, at 26 percent, to call for an impact on household income. Real wages are not expected to grow substantially in the short term either. Moreover, the credit crunch that the country is experiencing has an impact on both corporates (specifically SMEs) and households. “This has limited expansion in internal consumption and narrows the benefits of improved financial conditions to mainly large corporates,” Asba said.
3. Widening supply and demand gap.
This gap in the housing market has been widening for the last five years. Asba noted that 2012 residential and non-residential construction permits represent a tenth of the 2006 levels due to both the lack of demand and the difficulties construction companies and real estate developers are now facing in starting new projects. Meanwhile, the total housing stock stood at 25.3 million dwellings by the end of 2012, of which around 700,000 new dwellings are still unsold.
4. Mortgage market is nowhere near rebounding.
“The deleveraging process is ongoing among Spanish financial institutions, and we observe a transmission of this trend to households, although the transfer has not been very rapid,” Asba said. By November 2013, the number of mortgages granted fell by 26.6 percent year-over-year, which corresponds to 970 million euros and approximately 84 percent since the end of 2007.
5. Prices likely to drop further.
A report prepared by one of the major real estate portals in Spain (idealista.com) notes that of a sample of 0.5 million bids since 2010, the prices offered were 24 percent lower than the bids (as of August 2013). “As anecdotal as this might sound, the key message behind the statistic is that Spanish households are indeed waiting for a correction in prices,” Asba said.
At present Spain and Italy are the European countries where it is cheaper to buy a single family home , according to the estimates of the International Monetary Fund (IMF ) and KBC bank. Specifically in Spain it costs on average 170,000 euros, while in Italy it costs little more than 150,000 euros so as mentioned before prices are still expected to fall in line with Italy. Germany and the UK are the most expensive countries to buy a detached house with an average cost of more than 250,000 euros.
source : Idealista and International Business Times
This message was last edited by eos_ian on 21/03/2014.
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What confuses me, Ian, is that it seems like every year the prices drop by 20%, 30% or maybe even 40% in the earlier years of the recession and as this has happened for many years, I would expect vendors would now have to pay 'buyers' to take the properties off their hands. Or else every 100,000 piece of property would now be worth about 10,000...
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According to Euro Weekly this week sales were up in Malaga province by 33% in 2013 (over 2012) but as 50% of buyers are foreign they are not dependant on the rest of the economy recovering. Perhaps areas attractive to foreign buyers will see a faster recovery than the rest of Spain.
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David
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21 Mar 2014 9:25 PM
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Its not surprising that Spain is still struggling out of recession. Lots of potencial British buyers ( Spains biggest overseas market) are giving Spain a wide berth or holding on and doing nothing. Why you might ask ... waiting for projects like Paramount Park Murcia, and the new airport at Murcia both have had more starting dates than ive had hot dinners... Spain draggs everything out .. painfully...... you can get better value in the new EEC members countriesand If Turkey gets in thants another blow to Spain. How many deadlines come and go with nothing happening on the above major projects and yet tourism is Spain main industry. "Manana" is long longer an answer.
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I dont think Spain will recover for some time but its still a great place to go for holiday and we couldnt have more choice of cheap flghts since the "no frills boys" started up. The property"price hikes"of the 2007 period were well inflated and greedy developers who damaged Spain so much should be rounded up and put in jail.
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Inland properties are beginning to sell in our area quite quickly. To the point where a couple recently viewed a property and on requesting a second viewing, found it had sold. There is a glut of apartments on the coast but inland properties which were originally built over a hundred years ago with a nice parcel of land are becoming scarce. Buyers are beginning to realise that these are safe to buy as they have no planning issues. This is also helped by the pricing of most inland properties being realistic.
According to Kyero, property prices are beginning to creep up, so I do not see how anyone call foretell any further reductions.
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Until the previous (and still ongoing ) corruption problems are sorted
foreign buyers will never return to the past numbers.
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If lucky, there is another day.
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Although you can be specific to a region , for example the north coast just gets on and has not had the mercurial high and lows of the Costa's. The likes of Campasol have still hundreds of collapsing properties, essentially worth nothing. Spain's meteoric rise was on the back of unlimited Euro fund like Southern Ireland, the banks collapsed,debt never really goes away. For Spain to rely on tourism say from Britain it needs cheap air fares and they are not guaranteed. I think there is a holding pattern at present as the Med Rim enters the tourist season, whether this will transfer into the 2000 exodus from England is doubtful as much house funding was on the back of people using equity in British bought council houses which they often got for 20K and found it was worth 150K.
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midasgold
I think you hit the nail on the head with corruption
Add
High estate agents fees (in comparison with UK)
Poor quality of agents
Sales tax (still want money even when a loss has occurred, keeping teh 3K€ is simply wrong on all levels)
Stamp Duty
Inheritance tax for spouses
Land registiries
Health care
Self employment costs
All summed up in one word TRUST
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“The greatest enemy of knowledge is not ignorance; it is the illusion of knowledge”
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We all want to see Spain climb out of its current hole but unfortunately wishful thinking isn’t going to make it happen. One look at the parlous state of the economy, banking system and the unemployment prospects confirm this point. The talk-the-job-up brigade are usually those with interest in selling property and will seize on any published positive quote and embellish it with pathetic hyperbole and lots of % illustrations. An old Union shop-steward once said of a pay offer, “10% of b***** all is still b***** all.” How right he was!
All the misleading house price facts and figures you see are all ‘arranged’. Spain, unlike the rest of Europe use TINSA valuations to base its house price index on – not the actual price paid, (up to 30% less that the valuation). Let’s not forget who made a massive contribution to assist the inevitable crash in property prices – Yes it was TINSA themselves who were valuing poorly built homes in the norties at absurdly high prices, only to leave the buyers and bankers high and dry........ Yet, Spain still continues its relationship with this unpredictable organisation.
I notice that certain property brokers have targeted the Paramount Theme Park location to push properties to those uninitiated in the way of the Spanglish Estate Agent. This project is all but dead in the water, so any poor unsuspecting victim will end up living in a ghetto in a desert in the back of beyond with another unwanted airport in their back gardens.
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The government insisings on all businesses (start up or not) having to pay the "Autonomo" regardless of whether they make a profit or not is one reason why, if you ask me, the country can't climb out of the hole it is in. This tax or whatever it is stifles growth and entrepreneurship. I am interested to hear contrasting arguments.
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The government insisings on all businesses (start up or not) having to pay the "Autonomo" regardless of whether they make a profit or not is one reason why, if you ask me, the country can't climb out of the hole it is in. This tax or whatever it is stifles growth and entrepreneurship. I am interested to hear contrasting arguments.
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Woodbug, what exactly is your evidence that the paramount theme park is dead in the water?
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With Spain’s dismal record of theme parks that don’t happen it is reasonable to assume that absence of information or site activity after 4 years (March 2010) the proposed Paramount venture will exit the news in exactly the same way as the rest.
The developers told us two years ago that commencement of works was imminent, yet nothing has happened apart from laying a stone and digging up a few trees. Now we are told that the first part of this venture will be operational by summer 2015 yet Premursa the developers, do not own all the land required for the development, therefore no planning approvals can be granted at this stage.
The developers have not secured funding for the project which on 17th January this year we were told was 380million euro a far cry from the original projected 2.8bn funding requirement.
If the sum quoted of 380m is correct then don’t expect much at all – an average attraction cost for a theme park is around 70m euro, so after infrastructure costs, the attractions will be limited. Initially between 35 and 40 attractions were indicated, which represents a sum of 2.45bn and 2.8bn so this original figure tallies with the original plan.
With the absence of any proof of progress, no planning, no funding and no land, what convinces you that this development can continue – never mind finish in the next 12 months?
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Marbella Barcelona and madrid are the only areas bucking the trend house prices have risen by som 11% according to news
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Done the Spain thing Happier in the UK
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According to the CBN, property sales and prices are up in Alicante province as well. Price increases are probably because they raised the transfer tax to 10%.
However, after going for a walk this morning, we went through one area and it seemed like every other property was up for sale. Checking the prices online and apartments costing €125,000 in 2005 are now going for an average of 50 to 60,000. Houses that were 190,000 are, on average, around 120,000 although one was advertised for €93,000 with two others the same at less than 105,000.
Yet they are still building (and selling) in this area. Just who is buying all these off-plan properties at prices of 186,000 when resale ones (with gardens, lights, paving and so on all fitted) are going for €120,000?
Oh, and Brits are still the biggest buyers according to the CBN.
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Marbella Barcelona and madrid are the only areas bucking the trend house prices have risen by som 11% according to news.
It depends which news you read I think and whose figures are being published. There are several agencies all producing conflicting facts and figures concerning property none of whom consult each other. High-end and lifestyle homes will always be in demand, therefore command a higher premium. Good question Marie - Who is buying all these properties at top dollar? Residential sales in the last quarter of 2013 were 93,400 homes which included all investment purchases, distressed and private transactions. This is a 30.6% decline on the same period of 2012 and property prices decline accordingly. It's impossible to have a plunging market and increased comodity prices.
in 2013 It was estimated that more than 3.2million homes lay empty in Spain and as builders were throwing them up in the boom years at the rate of 800,000 a year - that figure is not surprising. In Europe there are 4.1 million homless people and more that 11m empty properties - an absolute disgrace in a civilized society who care more about the value of their assets and investments than they do for their less fortunate human neighbours.
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In my experience in Southern costa de la Luz the prices are pretty stable ie they are not dropping and neither are they failing. I base this on facts rather than Spainish doggy stats released by Madrid to crate optimism on the economy. Prices vary in two different ways ie prices to Spanish will always be a bit less than to outsiders and my data is based on two recent sales I have been involved in. I am of course qualifying this based on legal properties and not distressed sales where the owner has mortgage repayment problems. In this areas prices are stable due to not having a massive glut of poor quality flats or houses in half built developments. Buyers are coming back into the market albeit a low levels but there are buyers about which was not the case over the last couple of years
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Woodbug-what evidence do you have that Camposol, not CampAsol as you misspelt it, has hundreds of properties falling down , worth virtually nothing? As you may realise, I live here, and what you write is untrue; yes, some properties have had problems, a very small number out of 5,000 properties- certainly not hundreds! Any urbanisation anywhere in the world has its problems.Thousands of ex pats live in established properties with no problems.Camposol offers a wide choice of properties to suit all pockets, and is situated in a very attractive area, unspoilt, near the sea, what more could you want?
Where do you get your information? How are you qualified to write such rumour mongering rubbish?
People are very interested in What Camposol has to offer, but not if you and others like you, spout your unfounded comments about properties falling down, and Paramount being "dead in the water ", which hardly helps those trying to sell their properties.
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Woaaa keep yer wig on Campo - show me where I have ever mentioned Campasol or even Camposol in any of my posts? I know Camposol and it is a sought after community for those wanting to live in a British enclave with all amenities on the doorstep - nothing wrong with that. As far as the Paramount park is concerned my post is based on information taken from various respectable and reliable property portals circulated throughout the industry. The facts are indisputable and the term 'dead in the water' is my view of the receeding posibility of the project being builtbased on the facts known....... hardly 'rumour mongering' or 'unfounded comments'
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