Pain in Spain's housing market goes on

Published 28th Dec 2010

Sector faces years of falling house prices as sector struggles to offload massive glut of unsold homes


Costa Blanca, Spain Tourist areas such as the Costa Blanca could see price falls of up to 30%

Reports on Spain's ailing housing market show sales volumes are down almost 50% since the summer and prices may suffer further falls of up to 30% — with holiday homes in tourist areas likely to fare worst of all.

The Spanish market has collapsed since 2007, with prices of new coastal homes and older houses in inland "white villages" popular with British buyers plummeting 50% or more.

Now Spain's housing ministry – which counts domestic properties as well as foreign holiday homes – reports a record-breaking 48% drop in sales between July and September 2010. This coincides with austerity measures being introduced in Spain, including the scrapping of mortgage tax relief.

In response to that, asking prices of homes on sale have plummeted as desperate sellers try to attract buyers. The property sales portal idealista.com reports that prices in 14 regions of the country fell in November, while rival website facilismo.com shows price falls across Spain for 39 months out of the last 40.

Barbara Wood, a buying agent acting for Britons, bought a seven-bedroom home in the tourist hotspot of Ronda; it was advertised at €1.5m (£1.25m) but the seller accepted €850,000. An Estepona villa had a €750,000 price tag but went for €485,000.

She says: "Discounts of 20% are way too little. Few sellers have the guts to advertise an asking price close to what they actually take, so buyers have to wade through masses of property with daft asking prices."

British developer Taylor Wimpey reports business has been better in 2010 than in 2009, but the firm still has flats at Puerto Pollenca on Mallorca, originally priced at €467,000, that are on sale for €215,000. Spanish developers have similar offers. British eco-property website Greenmoves.com has a three-bedroom country house at Castellón near the Costa Azahar, boasting solar power and an orange grove, reduced from €124,000 to just €90,000.

Some UK agents are selling holiday homes repossessed by banks and now heavily discounted. Sterling Ackroyd has three-bedroom townhouses on Ibiza originally priced at €600,000 but now advertised for €300,000. Connells has some second-hand Spanish properties now discounted by 63% and new-builds cut by up to 53%.

"Some banks are entering a new phase of divesting themselves of their toxic product. But some of it is so ghastly that even the 50% or more discounts that are being flagged aren't enough to shift it," claims Wood.

More big price falls may be on the way. Consultancy RR de Acuña says there are 683,000 new-build homes in Spain looking for buyers, along with 700,000 homes advertised for sale by existing owners, and another 200,000 properties repossessed by banks and now on the market. The firm says that even if sales picked up, it would take at least five years to clear this glut.

As a result of the over-supply the consultancy warns that prices will fall by another 20% on average over the next five years – 15% in cities and up to 30% elsewhere, including popular tourist areas on the costas.

Some firms are suspected of trying to talk up the ailing market. Valuer Tinsa says in its latest market report that some coastal house prices actually rose 2% in November. "I find that hard to believe," says Mark Stucklin, a Barcelona-based analyst who writes a guide for buyers at www.spanishpropertyinsight.com.

Meanwhile Spain's economy remains in recession, there is 19.7% unemployment and the country's creditworthiness is officially classified as "on review" by ratings agency Moodys.

The housing industry is also falling apart. RR de Acuña's report says of 60,000 property sector companies, some 23,600 have gone bust, owing €137bn to banks. The pain in Spain, it seems, falls mainly on the housing market.

Source: ' Guardian '

View All Latest News