Sharp fall in real estate share value in Spain

Following sharp rises in property prices over recent years Estate Agents suffered a sudden fall in value on the Spanish stock market yesterday.

This collapse in value brought back memories of the damage suffered by internet companies when the technology bubble finally burst. Many analysts believe that property prices have blown up far out of proportion partly due to property speculation. Yesterday the Valencian Estate Agent, Astroc, suffered a spectacular fall in value on the stock market. However, what is not yet clear is whether this precedes a crisis in the housing market or is just an isolated incident.

The evolution of the small estate agent, Inbesòs, showed how important speculation is. Following a fall of 26% at the opening of the market it then shot up by 37% giving respite to some nervous investors. Infact Inbesòs has risen by 700% in three years and it is not even one of the most profitable in the sector.

The government played down the importance of what happened in yesterday’s stock market saying that some sectors had experienced excessive growth. It considered that people should not talk of a collapse but that it was a mere correction following historic highs in recent years. It also said that the value of Estate Agents continued to be higher than 12 months ago although some companies had grown out of proportion to their value which gave rise to the idea of a crash in this sector of the stock market.

The Governor of the Bank of Spain, Miguel Ángel Fernández Ordóñez, denied that the collapse in the value of various companies in the sector could be considered as an indicator of the property bubble bursting. He said that on the stock market rises and falls were never slight.

Fernández Ordóñez repeated that there is a gradual slow down in the property market and that prices were still far from crashing. The Governor of the Bank of Spain reminded the press that property prices grew 7% last year compared to 17% the previous year.

Lowest property prices in Spain

Only ten cities left in Spain where one metre squared costs less than 1000 euros
House and flat prices are nearing their peak, however this peak is very high. There are only a few cities left where you can find a house or flat for less than 1000 euros per square metre and this is only in a few neighbourhoods. According to a report by House valuers (Tecnitasa) these cities are Cuenca, Murcia, Jaén, Melilla, Alicante, Badajoz, Las Palmas, Lugo, Zamora and Jerez de la Frontera. The report covered 61 Spanish cities in total.

However, the cheapest cities influence the figures significantly. In the area called La Paz, in Murcia, prices have risen from 650 to 830 euros per square metre in one year. In the cheapest areas in Jaen, prices have risen from 670 to 850 euros per square metre. Both rises are above 25% in just one year.

On the other hand the highest prices have remained static. In the Paseo de Gràcia in Barcelona a square metre costs 11,000 euros and 10,000 euros in la calle Serrano, in Madrid.

There are 10 cities where the price per square metre has risen above 6000 euros. Apart from Madrid and Barcelona. These cities are San Sebastian, Bilbao, Zaragoza, Marbella, Santander, Oviedo, Sevilla and Gerona amongst others.

However Estate agents have confirmed that the drop in property prices is becoming more and more generalized following the boom during the last few years. In fact two reports published yesterday state that property prices dropped in the first trimester of the year. Second hand houses and flats rose less than 1% in Madrid and Barcelona and prices dropped in many areas of both cities. One report by Expocasa goes a step further and states that property prices dropped during the first trimester in 66 of the 91 cities and towns with more than 25,000 inhabitants.

The cities which have experienced significant drops in prices are Coruña (a 6.8% drop), Valladolid (4.5%) and Cáceres (3.7%), according to Expocasa, while Idealista highlighted a drop in prices in San Fernando de Henares (3.5%) and Esplugues de Llobregat (5.2%).

María Antonia Trujillo, the Minister for Housing yesterday said that the housing sector is stabilizing and going back to figures that were normal 16 years ago. Speaking at a conference organized by one of Spain’s largest unions, UGT, in Cáceres, she said that the government’s objective was for the annual rise in house and flat prices to match the rate of inflation.

Expensive flat in Madrid

The second most expensive flat in EU for sale in Madrid

According to three of the biggest web pages representing British, German and Spanish estate agents Madrid is the city where the second most expensive flat is for sale.
The most expensive flat is in the exclusive London neighbourhood, Chelsea, and is for sale at a price of 8.1 million euros. It has 7 bedrooms, a garden and a swimming pool.

The second most expensive flat in Madrid is for sale at 5.4 million euros. It is 600 m2 and has 5 bedrooms, a 22 metre terrace and a double garage. It is in Calle Almagro near la Castellana in the Chamberí neighbourhood.

In order to find the most expensive flats for sale in Europe a group of estate agents looked at prices in Barcelona, Madrid, Valencia, London, Liverpool, Manchester, Munich, Hamburg and Berlín.

In Spain Barcelona and Valencia are the most expensive cities for luxury flats following Madrid. According to this study the most expensive flat for sale in Germany is in Munich. It is 360 m2 and has 7 bedrooms and a library and costs 3.8 million euros.

Related:
Guide to Madrid
Houses for sale in Madrid

Properties overvalued in Spain

Overvalued real estate prices could condition economic growth in Spain.

A half yearly report on Spain by the Organisation for Economic Development and Cooperation (the OCDE) has predicted a growth in GDP by 3.3% in 2007 and 3.1% in 2008, however it has detected some imbalances: low productivity and the overvaluation of properties in the housing market by as much as 30%. According to the report, if these two issues are not addressed then economic growth will drop to 2% over the following decade.

The report, which was published on Wednesday, has reinforced worries regarding the property market in Spain. The OCDE indicated that property prices in Spain have doubled since 1998. It also noted that while a large number of properties remain empty the possibilities for renting in Spain are limited, something which is bad both for the mobility of the labour force and the unemployment rate. The report said that careful analysis had shown property prices to be overvalued by around 30% something which could result in serious economic imbalances over the long term.

Furthermore, the level of debt that Spanish families are getting into, partly due to high mortgages and rising interest rates, is increasing at an exaggerated rate of 22% according to economists from the OCDE. The report highlights the need for stabilisation in the property market.

The report also stresses the need to properly address the current distortion in the housing market which on the one hand stimulates demand but at the same time makes it more difficult for young people and those on low incomes to get onto the property ladder. According to the report by the OCDE, the solution lies in gradually eliminating some of the measures helping property buyers and creating a balance between the incentives to buy and sell property.

Related:
Property for sale in Spain

Bargain house sales in Spain

Property sector participates in January sales in Spain.

This years sales are to include special property deals too. According to a Cadena Ser article published today, if the price of other goods are reduced for the sales then why not flats – this must have been the thinking in Remax, a chain of estate agent’s which has reduced the price on some of its properties on sale.

The property sale will start next Monday 8th January and end on 31st January and will include 1060 properties with discounts of approximately 4% on the original price. This system was first put into practice last year in just one of Remax’s branches in Santa Pola, Alicante. Its success was such that the branch's sales of flats increased by 30% in January last year.

This year 68 branches of the same Spanish estate agent all over Spain will participate in the sales. Andalucia has the most offers while Valencia and the Canarias come next in terms of special deals available.

The reduced prices have been approved by the property owners who have agreed to participate in the sales. They have signed an exclusivity contract with the estate agent quoting the original price and the reduced price. In addition these contracts have been inspected by notaries in order to guarantee the reduced price for the buyer.

This campaign also includes garages whose discounts range from 500 to 1000 euros. For flats the discounts range from 1000 to 300,000 euros. The biggest discount is for an estate in Las Palmas, Gran Canaria valued at 1.3 million euros.

According to the president of Remax, this campaign is possible because the Spanish housing market is slowing down. Although prices aren’t falling there has been a slow downward trend in the sale of properties. And property owners who want a quick sale are having to lower their prices in order to achieve one.

Related links:
Houses for sale in Spain

Average mortgage rates in Spain

The length, size and number of mortgage loans in Spain continue to rise.

According to figures released by the Spanish Property Registrars Association yesterday, and inspite of the recent rise in interest rates, property-buyers in Spain are opting for longer loans and the average length of a mortgage in Spain has risen to 26 years and 3 months, that is six months longer then the average stood at the end of 2005.

The average monthly mortgage payment has also risen to 789 euros, 40 euros more than during the last three months of 2005.

And more and more people are taking out morgage loans according to the figures released by the Spanish Mortgage Association yesterday which indicate that during the first term of 2006 business in the loans and mortgage sector rose by 26 percent compared to the same period in 2005.

Average price of property in Spain.

Meanwhile house prices continue to rise, although as predicted the rate has not increased with respect to the previous year. According to the Registrars' report released yesterday, house prices in Spain have risen by 15 percent over the past 12 months which is exactly the same as the previous 12 months. The cost of new housing in Spain rose by 11 percent, considerably less than resales where prices rose by over 19 percent.

The average price of property during the first term of this year was 1,916 euros per sq metre.

Related:
Mortgages in Spain
Spanish bank mortgages for non-residents
Spanish banks

Slowest rise in housing prices for past 4 years.

This weekend Spain's Director General of Arquitecture and Housing Policy announced that in 2005 prices of property in Spain rose by just 12.8 percent, the slowest rise for the past four years.

The regions to experience the highest rises in (15.1 percent) and Castilla la Mancha (14.6 percent), whereas Cantabria, Castilla y Leon and Catalonia registered the lowest growth in the housing market, with rises and just 6.6, 7.5 and 8.8 percent respectively.

Experts expect prices to continue to rise during 2006, but at a gradually slower rate than in the housing boom of the past few years, as national demand slows down, investors turn away from the property market and look towards other forms of investment. And whereas prices are certainly not expected to freeze or fall in the short term, they are expected to rise least in areas with massive supply of new housing development.

Foreign markets will become more and more important to building developers and promoters from now on, especially since building has not slowed down yet, even though prices seem to be doing so.

So while it is a good moment for foreign buyers to find a possible bargain purchase in Spain, as always they are advised to go carefully, not to jump headfirst into a property purchase and to seek legal advice. If you are considering buying a property in a certain area of Spain and want our opinion on the price you are being offered, let us know.

Lowest rise in house prices in Spain since 2002

According to the General Director of Arquitecture and Housing Policy, Rafael Pacheco, the rise in the cost property has risen just 13.4 percent in the last 12 months. This represents the lowest rise for 3 years and, according to Pacheco, is the first clear result of the Spanish government's housing policies.

The General Director also indicated the regions in which house prices have risen most. These are Castilla La Mancha (19.8 percent), Aragon (16.4 percent) and the Valencian Region (16.3 percent). In Andalucía, traditionally one of the most popular destination for non-resident house buyers, the rise in house prices at 13.7 percent is only just above the national average.

The most expensive region as far as the cost of housing is concerned is Madrid (2,719 euros per sq. metre), followed by the Basque Country (2,537 euros), Catalonia (2,037 euros) and the Balearic Islands (2,003 euros). The cheapest regions are Extremadura (864.2 euros per sq. metre), Castilla La Mancha (1,255 euros) and Leon (1,297 euros).

Related
Revaluation of property in Spain per region
Investing in property in Spain
Houses for sale in Spain

House prices in Spain

According to a new report released by the Catalonian Savings Bank (Caixa Catalunya), the price of new houses in Spain will have risen by 16.2 percent by the end of 2005. This means that housing prices have risen at the same rate this year as 2003-2004, contrary to the expectations of some financial analysts at the beginning of the year who predicted a slowing down in the growth rate of Spanish property prices during 2005.

The Caixa's semestral report says that the figure is slightly below the record 16.8 percent growth in housing prices experienced in 2002 in what was a boom year for the property market in Spain.

According to the report, the price per sq. metre of new property in Spain currently stands at 1,777 euros, that is 247 euros more expensive than last year.

The Caixa expects the trend to continue in the short term, despite a marked increase in the number of new houses on the market. 708,000 new housing projects have been undertaken so far this year, compared to 687,000 last year which then was an all-time record. The report also expects the strong demand for new property in Spain experienced in recent years to continue.