Have house prices in Spain touched bottom?

Official statistics in Spain regarding house prices published by the INE (National Institute of Statistics) show falls in prices of around 11% since the start of the crisis. A figure clearly lower than the variation experienced in countries such as the USA and United Kingdom, which have also suffered their own property crises.

There are various reasons which have caused Spain, as a country, to see a less rapid fall in prices than other countries:

• Slowness in the legal system which guarantees mortgage foreclosures.
• The banks’ unwillingness to show the real value of the properties they are hoarding on their balance sheets (or those of their subsidiary companies).
• Low interest rates, which have given significant respite to many people with mortgages signed 30 or 40 years ago.
• The system of unemployment subsidies and family support for the unemployed.

In any case, like almost all statistics, the INE statistics show average values for all types of properties in all locations. If we analyse the situation province by province, and area by area, we can see that there are certain types of properties and areas where the fall has been much greater. In particular, in the Mediterranean area it is not uncommon to see holiday home developments in coastal areas which have lowered their prices by between 25% and 35%. It should be no surprise that in these areas the stock has diminished radically and, now that there is beginning to be a shortage of some types of properties, we are starting to see a slight rise in prices.

Most experts are forecasting a greater adjustment in prices of around an additional 10% or 15%, an evaluation with which I might agree, but bearing in mind that once again we are talking of average values for the whole of Spain. Those areas where the price has already fallen by 25% to 35%, and where the number of sales has notably improved, will not suffer new falls, but may even see small increases.