Property in Spain, according to a recent article in The Economist, is currently over valued by 50.4%! This shocking figure is enough to make anyone in Spain despair. How, you have to ask, could a reputable magazine like The Economist be so wrong about the Spanish property market?

The answer, unfortunately, is that The Economist ( I suspect rather lazily) have clearly relied upon Spanish goverment figures. These are notoriously unreliable when it comes to property in Spain. Indeed, almost every authoritative commentator in Spain finds what the Ministry of Housing has to say as risible. This is shown by their figures stating that the average drop in value of Spanish property since the boom has been only 12%. This is utter rubbish and has come straight out of the Alice In Wonderland execution of government.

The truth is that actually no-one knows for sure how much Spanish property has dropped in value since 2007. Indeed, it would be virtually impossible to give a precise percentage given the complexity of the marketplace – not helped by years of Spanish properties being bought partly for ‘black’ (undeclared cash) money. The latter means that many prices on Escrituras (property deeds) are, and always have been, nothing if not inaccurate.

So, what is the truth?

My own feeling, backed by day to day involvement in the Spanish property market, is that prices have already fallen (on average) by between 30% – 45%. This is certainly true of many Spanish properties that I know of personally and is echoed by the comments of other agents.

Certainly, if The Economist had said that Spanish property since the boom had dropped by 50.4% then they may not have been too far off. However, to claim that property in Spain is still 50% overpriced is just utter rubbish and simply does not take into account reality or the facts. If this sounds like me being defensive then look at what I have written over the past 4/ 5 years – during which I have expressed a consistently pessimisstic view of the Spanish property market. Indeed, I was warning of a potential property crash as far back as 2005!

As to the future? Well, property transactions over the course of this year have been pretty stable at some 30,000 – 35,000 sales per month, albeit that these represent about half the volume occurring during the boom. So, there is reasonable market activity.

The main problem remains the vast amount of housing stock still for sale. Again no-one knows quite how much but there is probably around 1 million new builds and probably the same number of resales. This fact alone will keep prices depressed for the forseeable future with the domestic market unlikely to recover until the Spanish economy picks up. This is unlikely to happen for some time given the 20% + unemployment rate, the (very late!) austerity measures and the lack of an alternative to replace the ruined Spanish construction industry – capable of providing mass, wealth creating employment.

Regarding Spanish property prices – if I had to make a ‘call’ – I would predict a further gentle slide downwards in average Spanish property values over the next twelve months. However, as I have said before, there is a huge difference between average prices for a cross section of properties in Spain (many really awful and not suitable to North Europeans) and particular properties.

‘Particular’ properties are fully legal, quality Spanish properties and these will now, I believe, start to hold their values and are certainly well worth buying. You just need to know the difference between an ‘average’ property and one that, for objective reasons, will hold its value and prove to be a sound investment. Given the nature of the Spanish property market, this is something of a science…