The last week delivered a few interesting figures and indicators regarding property transactions and property prices in Spain that are certainly helpful if you put them all together. Prices may fall a bit further in 2011, which could reactivate the market.
1. REGARDING PROPERTY TRANSACTIONS IN 2010. The INE (National Institute of Statistics) said that, in 2010, property transactions were made up of 441,368 units. This is an increase of 6.8% compared to 2009. The news seems to be good (and it is indeed) but it is just a tiny improvement of total sales: 27,975 properties more. According to experts, the most likely explanations for this increase are:
1) the end of the tax redemption in 2011, announced by the Government; and
2) the announcement of higher VAT.
Both factors apparently encouraged buyers to purchase in 2010 before the Government’s measures come into force.
2. ABOUT PRICES. The following figures make us think that if you need to sell in Spain now, you will need to reduce your asking price. On the other hand, the buyer will have room to negotiate.
- According to the Tinsa index, average national prices in January 2011 are down by 19.6% since the peak in January 2008. Also, prices have dropped by 5% in January 2011 compared to January 2010.
- The larger Spanish online property portal, idealista.com, published last week that, in January 2011, 26,679 advertised properties dropped their asking price. The average drop was €24,679. Madrid, Barcelona and Zaragoza are the cities in which more property prices were down.
- As an extra example (not relevant but we just want to include it), the current Investment opportunity in Lavapies (Madrid) that we launched last week has a lower asking price than the original asking one. The owner has dropped the price by €16k. The online asking price of the studio flat is €106k but for THE SPANISH BRICK he has agreed to drop the price to €90k.
3. MORE REPOSSESSIONS. Nearly 200,000 properties changed owner in 2010 because of repossessions and other non-commercial circumstances. The rate of repossessions rose by 8% from October 2009 to October 2010 because of the crisis.
4. THE EURIBOR still rising little by little. We are sorry to say that many Spaniards will struggle this year a lot… in order to pay their mortgages with rising Euribor (now at 1.72%). Sellers are hurrying to reduce their asking prices in order to attract buyers. Potentially, new sellers will be forced to put their properties on the market otherwise they will be repossessed – sadly a vicious circle.
5. LEADING LOCATIONS. The Madrid region is leading the 2010 national deals increase (6.8%) because in 2010 the rate of transaction was 17.5% higher than in 2009. We already talked in other article about the population growth of Madrid and property prices. Also, if we could say that there is a two-speeds market… Madrid capital could be at the head.
- Potentially, buyers and investors will be the beneficiaries of this mess.
- In 2011, we will probably see a more dynamic market with more transactions, which will confirm a slow recovery of sales.
- The point about Madrid is important because a fast recovery of the main capital means that demographic trends will naturally tip the balance towards residential markets in cities, where the economic relations tend to be concentrated. At least some logic is working in the Spanish market.
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