Property prices to fall more than 20% in 2009 and surplus housing stock estimated to reach 1.5 million
According to recent figures published by the property evaluators Tinsa property prices will fall by 20% by the end of 2009 with a continual fall in prices of between 1 and 1.4 percentage points a month. From January 2008 to January 2009 property prices fell by 10.1% a figure which completed 11 months of consecutive falls according to the Index of Spanish Property Markets (IMIE) published by Tinsa. The principal cause of the fall in prices is the falling number of house sales and the surplus stock which is continually growing.
In a press conference Luis Leirado, the Chairman of Tinsa, said that 2009 had started with an interannual fall of 10.1% which is the first two digit fall in recent years. Furthermore it is 1.3 points more than at the end of 2008.
This interannual fall of 10.1% has hit Mediterranean coastal areas the most where prices have fell by up to 12.
6% from January 2008 to January 2009. Metropolitan areas have also seen prices fall by 10.9%. With regards to capitals and large cities prices have fallen by 9.6% and in the rest of municipalities prices have fallen by 10%. In the Balearic Islands and the Canary Islands prices have fallen by 8.2%.
According to Tinsa the reason behind these price decreases is the fall in the number of house sales together with the problem of the accumulation of 930,000 surplus properties by the end of 2008. Tinsa forecasts that the number of surplus properties in the market will reach 1.5 million this year.
Another important factor is the number of new housing stock coming onto the market. In 2008 745,000 houses and flats were finished but only 287,000 were sold an imbalance which is expected to get worse in 2009. The increase in surplus housing stock is a consequence of building projects begun in 2007 ( a record breaking year) which now means that about 45,000 new properties come onto the market every month but the sales of new houses is now just 20,000 a month.
According to Leirado, the negative panorama which the residential housing market now faces will only get better once the economy picks up or the opinion of potential buyers who do not consider it a good moment to buy property changes.
In his opinion for this change to come about and for buyers to take more interest there needs to be more finance available. However, whilst the number of unemployed continues to rise and the income of households continues to decrease this looks unlikely to happen. According to estimates made by Tinsa, household income fell by 33,000 euros to 32,900 euros in the fourth quarter of 2008 which is the first fall since the 1990’s.
With regards to property sales picking up Leirado considers both renting and subsidised housing (VPO) as two interesting alternatives that could help reactivate the housing market.