Words: Ashley Rigg
Published: 15th August 2011
*Spanish mainland holiday home market double dips
Property prices on Spain’s mediterranean coast are now falling at nearly double the rate they were a year ago, according to TINSA, one of the country’s leading appraisal firms.
The index shows prices in the region fell 9.5% in the year to the end of July 2011, compared with price falls of 5% a year earlier.
Interestingly, the pattern is not repeated on the Balearic and Canary islands where prices fell just 2.5%, significantly below the average Spanish house price fall of 6.4% and well below the declines seen in mainland coastal regions.
The most obvious explanation for the disparity is that the Balaeric and Canary islands have less issues with oversupply than areas such as the Costa del Sol. It is also likely that the statistics from these island destinations reflect the higher proportion of international buyers as a proportion of the total market.
Double dip
After sharp declines in 2009, the rate of price falls began to slow in 2010, prompting speculation from some commenters that
the market was beginning to stabilize.
However, it seems much more likely that an illusion of stability was created by loose monetary policy (quantitative easing, low interest rates) and more importantly by Spanish banks not releasing stock onto the market.
The property boom was created by a huge credit bubble and the bust will not be over until the banks complete a painful process of de-leveraging. This means even tougher lending conditions and further increases in supply.
The official figures (
in so much as you can trust them), suggest property prices are
still massively over-valued.
Of course the average figures are always misleading and a few prime areas will escape relatively unscathed.
García Montalvo, an economist at the University of Barcelona, recently predicted
four stages of a property crash: denial, blame, delusion and capitulation.
The biggest risk with today’s figures is that they signal the end of market delusion.
Source: Global edge
User Comments
Its a pretty accurate summary of the situation both past and present. The percentage of the price drops is always difficult to agree with because there are so many different ways of calculating them.
it is true however that the price drops are less aggressive on the Spanish Islands as opposed to the mainland coastal areas such as Costa Blanca and Costa del Sol.
In my experience I find that unless the properties in the mentioned mainland areas are being sold for absolute rock bottom prices the ever needed sale for some is very difficult to achieve at this current time.
There are several reasons:
1. Too much choice
2. Reluctant risk departments
3a little or no confidence in the market. especially amongst expats and foreign investors
3b. fear that the prices will continue to drop
Its not all bad though. There are some great deals in Spain and if you can quickly work out the good from the bad and be decisive the Spanish property world is your oyster.
Spain is still a number one destination, the infrastructure is second to none and the lifestyle is also fantastic. It is not hard to find reasons to live or own a holiday home there.
It just needs to be done in the right way.
gareth jenkins,
Hogareth Property Group