Spain property price falls
News Article Date: Monday 06th of July 2009
Spain has close to 1 million newly built properties languishing on the market in search of a buyer, and almost 50% of them are holiday homes on the coast, claims a recent article in the Spanish financial daily Expansion.
As a result, coastal areas of the Valencian Region, Murcia, and Andalucia have gone from being the stars of the holiday home boom to leaders of Spainís growing glut of unsold new homes. According to the latest figures there are 46,366 unsold new homes in Alicante province (Costa Blanca), 30,027 in Valencia, 27,279 in Murcia, and 21,902 in Malaga province (Costa del Sol), a total of more than 150,000 unsold new homes, though the true figure could be much higher, claims the article.
Spainís holiday home sector is going through one of the worst periods ever thanks largely to a collapse in both domestic and foreign demand, argues the article. Rising unemployment has throttled domestic demand, whilst Spainís deteriorating reputation as a place to invest in property has squashed foreign demand. ďOur Achilles heel has been the inexorable rise in prices and the bad image attached to Spain as a residential property investment destination,Ē says one expert, quoted in the article.
Offering big discounts to stimulate sales isnít as effective with holiday homes as primary housing, we are informed. A recent property bazaar for second homes on the coast, organised in Madrid by one of the countryís leading estate agents, delivered disappointing results, despite discounts of 20% to 30%. Only 28 sales were made, compared to 184 at a similar bazaar for principal homes in Madrid and other cities.
Spanish property prices fell 7.6% in the first quarter of the year compared to the same period last year, according to the official property price index published by National Institute of Statistics (INE). This is the biggest fall on record since the index started in 2007.
Broken down type of property, new build property prices dropped by just 2%, whilst resale prices fell a chunky 12.5%. This is the first time that new build prices have fallen since the index began.
In reality, the index has to be taken with a pinch of salt. Nobody in the business believes for one moment that new build prices are only down by 2% in a year. 20% would be a more accurate figure for both new build and resale prices.
Quarter to quarter, prices fell 2.7%, a slight improvement on the 3.1% fall clocked up in the previous quarter. This suggests that the rate of decline in prices might be slowing, having peaked at the end of 2008.
By region, prices fell the most in Catalonia (-13.7%), Madrid (-11.2%) and the Basque Country (-10.8%), all of them regions with the highest property prices in Spain. Prices fell the least in Galicia (-0.5%), Murcia (-1.6%), and Asturias (-1.8%), three regions with some of the lowest prices in Spain.
The INE compiles its index using data provided by notaries who witness most property sales in Spain. However, despite being present at the exchange of deeds, notaries do not, as a rule, witness undeclared cash payments, still a common feature of buying property in Spain. This distorts the data provided by notaries.
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