I post frequently in burbuja.info/inmobiliaria/burbuja-inmobiliaria/ a site dedicated to the housing bubble in Spain. Unfortunately, we shared in common the developments of hugh housing bubbles. For this reason I am looking here for your views on this topic.
Just to share information with you, I will post here regularly the evolution of house prices in Spain as indicated by IMIE (which is probably the best indicator in Spain (used by the IMF). tinsa.com/213-fichas-mensuales.html. It is a monthly indicator released with about fifteen days delay.
This is how it looks the index referring prices in main cities in Spain:
The average price (not median) has fallen from 2.433 €/m2 in september 2006 to 1.985€/m2 in july 2010. Banks have avoided deeper falls by keeping in their balances enormous stocks of new houses from defaulting builders, and also by “extend&pretend” with foreclosures being delayed indefinitely.
The end of tax breaks in 2010 and new policies from the Banco de España trying to force banks to clear stocks will result in a deeper price fall coming soon.
Hi Marai and welcome. Do you have a graph with a longer timeframe than 2005? In Ireland, the bubble was well started by that date and peaked at the end of 2006. The years 1997-2005 were quite bubbly too!
Are there any moves to extend the tax breaks?
What are the new policies from BdE?
How will this affect the banks/cajas?
Are their balance sheet heavily weighed towards commercial/residential property?
Thanks. This series started in 2001 and I can graph it (will do). As in Ireland, prices have been climbing since about 1996. In january 2001 the average of this particular series was 924€/m2, half the average price in July 2010.
The government announced that tax breaks (approved many years ago) for people with incomes above 24.000€ would expire in december 2010. It was supposed that it would spur sales before expiration but so far the effect is almost not noticeable.
BdE is worried about zombi banks accumulating thousands of new homes trying to avoid writedowns in their balances. BdE bank has stepped to increase reserve requirements for homes held by banks (also by the end of 2010). The effect is that banks/cajas are offering more aggresive discounts.
Cajas are mostly weighed towards residential properties, although commercial properties may also be important (BdE data does not allow to distinguish). For many cajas, total mortgages (comm. and res.) account to about 70% of assets. So they are really exposed to a housing meltdown.
The market in Spain is down materially more than 18%, more like 30-35% from the peak
Most indices are based off asking prices and even the official data from the Spanish Ministry of Housing suggests a fall of only 12% or so.
The reason all the indices are kept artificially high is to allow banks carry foreclosed property at artificially high prices on their books.
Its a well known fact in Spain, that if a property is advertised for X, you offer 25-35% below that and your offer will be accepted within a few minutes
The well known thing about home price indexes is that they are lagging indicators when they are based on current transactions because they were signed weeks or months (even years) before. Also, average prices don’t say anything about changes in the sales mix, and specially in a period of low sales there may be very relevant changes affecting the composition of sales. This is not like the CASE-SHILLER index for US home prices which is based on same home sales…
Is safe to say that prices fell more that 18% from peak according to this index. Just it. One just have to know that there are flaws on it and I don’t consider it as a guide for home buyers. The index only says when, aproximately, prices began to fall and what is the recent trend.
Advertised prices is nothing that can be used to estimate trends at all. Let me tell you that the problem is that very few make offers, and many of those few cannot get a mortgage. And this is one of the reasons that make home prices look sticky.
Don’t know if this is any use in getting a handle on property price falls in Spain in general but here goes:
We bought a townhouse in a white village in inland Andalucia in 2005. We’ve just sold it and got the exact same price that we paid for it in 2005.
We had the property valued in late 2006/early 2007 (peak of the Spanish bubble, I think) by a very experienced local (British) estate agent, who by all accounts was far more realistic in her valuations than the fantasy values dreamt up by the local banks and cajas.
I can confirm price/value of our property has fallen exactly 40% from peak. We were very lucky to sell and get most of our equity back as prices continuing to fall off a cliff in inland Andalucia.
