Spanish property market is a disaster, with transactions plummeting by more than 40% during February (compared to February 2007) in key regions such as Catalonia. Despite the fact that newly built properties are selling better than resales, developers are also having a terrible time of it, with sales down by around 60% since September 2007, swelling a growing stock of 500,000 + unsold new properties. On the other hand, prices don’t appear to have collapsed, at least not yet, and there are pockets that aren’t doing too badly, basically in the highly-differentiated, quality segments in good locations. That’s a rough overview of a complex situation in which plenty of exceptions can be found.The most widely used housing market statistics in Spain are the quarterly figures released by the Ministry of Housing.The latest figures, published last week, show that average national property prices rose by 3.8% to 2,101 Euros/m2 over 12 months to the end of March 2008. On a quarterly basis, average prices rose by 0.8% in the first quarter of the year.
In the Spanish press much was made of the fact that property prices have declined in real terms for the first time in a decade. With consumer price inflation running at 4.5% in March, a nominal increase of 3.8% in house prices turns into a fall – after adjusting for inflation – of 0.7%. So thanks to inflation, the average Spanish property is now worth less than it was a year ago. Even so, given the carnage in the market, you would be expecting significant nominal falls about now, as is happening in the US and the UK, not just inflation-adjusted falls. The answer lies in Spain’s dodgy official housing market statistics, more of which later.
As usual, regional variations of property price changes were significant. The biggest 12-month increase was in the Andalucian province of Huelva, on the border with Portugal, part of the Costa de la Luz, where prices increased by 9.5% over the last year, at least according to the government’s figures. Pontevedra, in Galicia, was next best with 7.6%, followed by Asturias, also in the north of Spain, with 7.3%. Madrid, Spain’s capital and biggest housing market, was the weakest, with a nominal gain of just 0.1%, followed by Alicante, home to the Costa Blanca, with 1%.
On a quarterly basis (Q4 2007 vs Q1 2008), prices increased by 3.9% in the province of Huelva, 3.6% in Seville, and 3.4% in Valencia, but fell in 5 provinces / regions: Madrid (-0.1%), Murcia (-0.2%), Tenerife (-0.3%), The Balearics (-0.5%), Cantabria (-0.7%), Alicante (-0.8%), and Castellon (-1.3%).