The Spanish property market continues to suffer acutely according to the latest reports. Some 600,000 homes are currently languishing on the market unable to find a buyer, and a further 200,000 part-completed properties are in the same boat. Most of these are in the popular holiday areas.
According to the Bank of Spain, house prices in the country have fallen 17% since 2007. They say this like it is a good thing, when in reality, sellers are having to slash their prices much further before they can even think about getting an offer.
Like the British owners of a three bedroom villa in Valencia’s Castellion, who have slashed its price from £109,000 to £79,000 (a drop of over 15%) and then to £66,000 (a drop of over 30%) and still have no takers. Taylor Wimpey is selling off its villas in the Costa Blanca at £140,000 which opened for sale at £235,000, a reduction of around 40%. Prices in the Balearics, previously thought to be immune are also down around 40%.
“There are some real bargains, especially at the top of the market,” says a spokeswoman for Savills estate agency, which has one new luxury villa on Mallorca slashed from £15.4m to a mere £9.5m.
As well as the dire state of the market (oversupply, overvalued, prices falling, illegal properties), the weak pound/euro exchange rate is also being blamed. One developer is offering a guaranteed rate of 1.25 Euros to the pound in order to entice buyers to take the plunge in their Catalunya golf resort.
Another major problem for the market is the baron mortgage market, arguably especially for foreigners.
“Spain stands out with a housing market and a lending record that’s far worse than France, Portugal or Italy. If you must buy, somehow try to remortgage money from your own home back in Britain,” says Melanie Bien of mortgage broker Private Finance.
4 years into the downturn and there are still few signs of hope. The stark rise in the sale of new homes at the start of 2010, hailed as the start of a recovery was simply a mad rush to beat the deadlines on the scrapping of mortgage relief and an increase in VAT. This was proven by the slide in sales towards the end of 2010.
With so many homes and so few buyers, the additional 257,443 further homes completed in 2010 can only add to the misery. Despite this worsening of the oversupply, the construction industry declined 43% in 2010 according to Eurostat.
In the UK homes are still unaffordable and this needs to be corrected either by wage rises or the faster option of price falls. In Spain the situation is the same, but on a grander scale. Spain built more homes during the boom than Italy, France and Germany put together. No matter how long it takes the economy and banking sector to recover, and prices to fall far enough for people to start buying in numbers again, the oversupply is so severe that the only cure is time, and a lot of it. Spain will likely face a property depression until at least 2015.
Photo credits: Kevin via Flickr