House prices fall in Spain for the first time in 10 years
The fall in property prices in Spain is now official. House prices have fallen for the first time in 10 years according to figures published today by the Housing Ministry which show that prices have risen by 4% since April 2007 which is 0.5% less than the rate of inflation for this period. During the last property crisis, which occurred in the 90’s, prices continued to drop for 7 years.
Figures for the last quarter show that property prices have only risen by 0.8% and although during some quarters in 2007 prices rose below the rate of inflation this is the first time in a decade that property prices have dropped in real terms over the last 12 months. Another record is that the average price of a square metre in Spain is now calculated to be 2,100 euros.
Beatriz Corredoris, Spain’s new Minister for Housing, faces an immediate challenge in her post given that she has arrived just at the moment that house prices are rising less than the rate of inflation.
Moreover, some analysts predict a sharp fall in the property sector.
However, property developers refuse to admit that the drop in prices affects new housing. However, statistics published today only talk about prices and sales. Neither of which show a positive panorama. It is estimated that the sale of used housing has dropped by 23% whereas sales of new housing have dropped by only 0.9%. Nevertheless, these statistics are a lot more positive than those of the Spanish National Institute for Statistics which estimates that the sale of used housing has dropped by 36% and new housing by 15% in 2007.
The last stronghold for the property market in Spain which now appears to be in free fall is subsidised housing. According to official figures this sector of the market has evolved well.
Figures show that around 200 families buy a house or flat in this sector each day which totals 73,000 properties a year. This translates as a 20% rise compared to 2006. These figures are significant not only for construction companies that don’t know what to do with surplus stock but also the government which has made a commitment to increase the number of subsidised houses and flats to 150,000 a year.
The evolution of the property sector is one of the reasons why predictions for economic growth are gloomy. Funcas (the Foundation of Building Societies) has estimated economic growth in Spain at 2% for 2008 and the figure for 2009 is even worse at just 0.9%.