Posts Tagged ‘House prices’


April 21st, 2009

House prices in Spain fell 6.8 percent in the March quarter, compared with the same period in 2008. On a quarter-on-quarter basis prices declined by 3 percent — the fourth consecutive fall and the biggest yet.

House Price Index March 2009

House Price Index March 2009

Credit Suisse analysts said supply and demand were out of kilter, with one in six people out of work and 1.5 to 2 million houses sitting unsold. The average Spanish home costs 7.2-times the average household’s annual income, against 4.6-times in Britain and 3-times in the United States, the bank said.

‘Unemployment is fast increasing and that is a leading indicator of future delinquencies in the banking sector and potential declines in house prices,’ the Swiss bank said in a note after the figures were published.

Most industry experts say government data underplays price declines in the Spanish property market, which saw a 39 percent fall in the volume of sales in January, year on year.

However, to put Spain’s price drop of 6.8 percent in perspective, house prices in Ireland, whose housing boom is most frequently compared with Spain’s, fell 9.7 percent year on year in February — the 24th consecutive month. In the UK, prices had dropped 12.3 percent over the same period.

‘I think we are all aware that prices had not adjusted to their true value. This tendency shows the adjustment,’ Anunciacion Romero, housing ministry director general told journalists. She declined to say were prices would go from here.

A recent Reuters housing poll of Spanish and foreign-based economists found that on average prices were expected to fall 32 percent from their 2007 peak.

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April 15th, 2009

An article in ‘El Mundo’, one of Spain’s leading news papers, suggests there may be signs of recovery in the Spanish property market, in one of the first positive articles on the outlook for the market since the crisis began.

“It appears to be the beginning of the end of the worst period for property sales since the crisis began,” says the article. Pointing to encouraging signs that real estate markets may have bottomed out in the US, the UK, and France, the article suggests that Spain may be part of the trend.

The optimism also comes from a new report by Gonzalo Bernardos, a property market expert and professor of economics at the University of Barcelona, who argues that Spanish property market will come back to life this year, after a dismal 2008.

“There are five key reasons for saying that there will be more home sales in 2009 than there were in 2008,” writes Bernardos in his report. “Interest rates are lower; house prices have fallen back to their 2003 levels; banks are lending more; investors are coming back; and many people who were thinking of renting have decided to buy.”

Demand for housing is tempered by the cost of mortgage borrowing. With interest rates declining, Bernardos expects sales to pick up. “There is a fundamental variable,” explains Bernardos. “People buy homes in response to mortgage costs, which have gone from rates of 6.25% in September to 3.25% today. We are talking, in general terms, of a fall in mortgage repayments of 40%.”

There is, however, a flaw in this argument, which the article in El Mundo does not pick up. Euribor – the base rate normally used to calculate mortgage rates in Spain – may have fallen rapidly to historic lows, but the average interest rate charged on new mortgages is actually rising, and credit terms getting tighter, making it more expensive for new borrowers to buy homes. Falling Spanish mortgage rates are only benefiting existing borrowers, who already have a home.

Another positive sign, says the article, is that housing starts picked up in the last quarter of 2008, rising by 7% compared to the previous quarter.

The recovery is already underway, suggests Bernardos, who says that, so far this year “sales have been between 25% and 40% higher than in the same period last year.”

So the market bottomed out in 2008, goes the argument, when house sales fell by 28.8% whilst property prices fell by 5.4%, all according to official figures. On the question of prices, Bernardos doesn’t believe the official figures. “The fall in prices hasn’t been less than 20%, and in some places much more,” says Bernardos.

Another real estate expert cited in the article says that sales rates at new developments have picked up significantly. “In many developments they have sold more in the first quarter of 2009 than in the whole of 2008,” he says, also arguing that “prices have already bottomed out.” “Banks didn’t know where the bottom was, now they do and they are giving 80% mortgages because they feel the market has bottomed out,” he goes on, whilst also warning that “nobody should expect bargains at 50% discounts. That’s not going to happen.”

Whilst Bernardos expects the market to return to life this year, that doesn’t mean he expects prices to start rising soon.

“Sales will start to rise in 2009, whilst prices will stop falling in most places by the end of 2010,” writes Bernardos in his report.

But if Bernardos is right, and prices continue to fall this year, that will encourage people to delay their purchase decision, and reduce the number of sales. The article does not pick any holes in his arguments.

And at no point does the article mention of the second home market, which operates differently to the primary housing market. Given the present state of the economy, with unemployment rising across Europe, it’s not hard to imagine that it may take a while longer for sales of holiday homes to pick up.

Story from Mark Stucklin

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March 8th, 2009

Homeowners across Europe saw the value of their properties slide last year as demand for new homes plummeted because of the impact of the credit crisis on mortgage supply in the major economies.

House prices were falling in every European market by the end of 2008 when adjusted for inflation, according to the Royal Institution of Chartered Surveyors, although a few such as Greece and the Netherlands were still slightly positive for the year as a whole after initial growth.

Core markets are set to suffer “marked downturns” in 2009, according to he report, written by Professor Michael Ball, who blames significant falls in mortgage lending, coupled with the economic downturn.

Professor Ball said: “The world financial crisis and economic downswing have hit European housing markets badly. Some countries, like Ireland and the UK, led the decline but by the last quarter of 2008 the effects had spread across Europe.

“There is greater synchronisation of housing market decline in Europe than has been seen in the past and there are going to be some tough times before marked recovery occurs.”

Rics said that any future revival of European housing relies on the ability of European governments to cope with the mortgage credit shortage as well as the scale of the economic recession.

The UK was one of the worst performing markets, where house prices fell 16 per cent in 2008, second only to Baltic states such as Estonia, where prices dropped 23 per cent but which has a relatively small residential market.

The UK housing market continued to weaken last month according to the Halifax house price index yesterday. Prices fell by 2.3 per cent in February, more than reversing an upward bounce in January. In the three months to February, the decline was 3.6 per cent.

House prices also fell significantly in central and eastern Europe, Ireland, France and amongst the Nordic countries last year.

In contrast, previous years saw house prices in countries such as Estonia as well as Scandinavia, central and eastern Europe and parts of the Mediterranean outpace other European countries.

Rics said that even those economies that did not experience a boom in house prices have not been spared from the squeeze in the market. In Germany and Austria, it said, a lack of credit has hit demand and it predicts a further fall in house prices and activity in 2009. Sales also declined in Italy, where mortgage growth was negative in 2008 for the first time in more than a decade.

Spanish house prices surprisingly recorded only moderate price falls. In central and eastern Europe, Rics said that the worsening financial turmoil has hit residential markets very hard, with both transaction levels and prices down significantly.

From: Financial Times

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November 2nd, 2008

The latest Spanish House Price Index from reflects average asking prices for Q3 2008 – and it contains some surprises.

Overall, the average house price in Spain appears to have increased from €240,000 to €245,300 – in just three months. In the current market conditions, how can an apparent increase in house prices be explained?

Digging a little further, the overall increase can be narrowed down to 10 provinces which have experienced sizable quarterly increases themselves.

In Malaga province, average property prices have increased 4.3 percent during the third quarter, while showing an average yearly increase of 1.4 percent. Especially properties with 2 to 5 bedrooms seem to enjoying increasing popularity among buyers.

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