The Eurozone debt crisis has hit many member nations hard, and Spain’s bruised economy and property sector has taken an exceptionally brutal beating. High unemployment is fueling a downward spiral a housing market that collapsed after a boom four years ago, which has left Spain’s banks saddled with bad debt. The result has been a continued decline in prices, and the national statistics institute INE reports that prices have fallen 12.6% in the last year. Some analysts believe this is a conservative estimate, though, and that actual values have fallen as much as 30 to 50%. For more on this continue reading the following article from Property Wire.
In the first three months of the year Spanish house prices fell 12.6% year on year, their sharpest decline since current records began.
The figures from the national statistics institute, INE, marks the biggest fall since it began collecting data in 2007, easily beating the previous trough of 7.7% in the second quarter of 2009. It comes during a deepening a property market slump and is more bad news for the country’s battered economy.
Spains banks were left high and dry after a housing boom collapsed four years ago, saddled with billions of euros in bad debts related to the property sector, while sky high unemployment has driven a sharp climb in unpaid loan rates. With the banks struggling to stay afloat, loans for anyone wishing to buy a new home are declining rapidly, with mortgage lending suffering its largest fall in over six years in February.
In a report earlier this month, the International Monetary Fund (IMF) said Spanish house prices could drop by almost 20% this year under an adverse scenario. The INE data shows how prices are faring in different regions. Andalucia saw price falls of just 9.8% whereas the Balearic islands were down 14.9%, as were prices in Aragon and Catalonia. The latest house price index published by Tinsa, a leading appraisal company, showed a decline of 11% in May compared to the same time last year, with house prices on the Mediterranean coast, where most holiday homes are located, and from the peak of the market to present are down 14%, with the Balearic and Canary islands down 24%.
All these figures are too rosy, according to Mark Stucklin, of Spanish Property Insight. ‘It seems the measures recently introduced by the government to bring down house prices are having some effect. Or maybe we are just reaching the point where official figures can no longer keep up the pretence that house prices havent fallen as much as they have,’ he said.
He believes that in reality the prices at which properties actually sell are down by between 30 and 50%. ‘Rosy official figures are no laughing matter. They cause people to wait for price falls that have already happened, which just drives the price down further, and drives away foreign investors,’ he explained. ‘And the problem is that all the most influential organisations take official figures at face value. One of the best things the Spanish government could do right now is produce some reliable house price data, and fast’ he added.
This article was republished with permission from Property Wire.