Spanish Property Market Update

The latest real estate figures on prices and transactions are giving hope that the Spanish property market is improving but foreign property investors are still not returning to the country in great numbers.

Prices are still falling, but less with every passing month, according to the monthly house price index published by Tinsa, one of Spain’s leading appraisal companies.

However the Tinsa figures show prices have fallen the least over 12 months in coastal areas and the Islands, areas traditionally popular with foreign buyers looking for fly to let holiday properties and retirement homes.

Average Spanish property prices fell by 4.4 percent over the 12 months to the end of May.

“If the Tinsa figures are to be believed, the rate of decline in Spanish property prices has been slowing since June 2009, when it peaked at 10.1 percent,” said Marc Stucklin of Spanish Property Insight.

“If the trend towards smaller declines keeps up, average property prices will be stable, or even growing slightly before the end of the year.”

But Stucklin points out the Tinsa figures are based on their own valuations, not actual transaction prices.

“Most of these valuations have been paid for by banks and for several reasons they might not give a true picture of property prices,” he added. “Nevertheless, they are interesting in what they reveal about trends, not to mention the valuations used by banks for mortgage lending purposes.”

Prices are down 4.1 percent on the coast and 2.4 percent in The Canaries and The Balearics.

On a peak to present basis prices are down 16.5 percent nationally, 21.4 percent on the Mediterranean coast, and 12.8 percent in the Canaries and the Balearics.

However foreign buyers are not flocking back. The latest figures from the Ministry of Housing show non-residents bought just 513 holiday homes in Spain during the first three months of the year.

According to the Ministry transactions were up in the first quarter by just 1.5 percent and on a cumulative 12-month basis sales were down 85 percent.

Sales increased over 12 months in places like Catalonia, up 13,6 percent, The Balearics, up 7,9 percent, Asturias up 4,6 percent, Madrid up 4,5 percent, Valencia up 4 percent and the Canaries up 1.4 percent.

Prices fell by 22 percent in Murcia, were down 14.4 percent in Extremadura, down 10.3 percent in Castilla La Mancha, saw a fall of 9.5 percent in Andalucía, some 7.8 percent in Navarre, 2.8 percent in Cantabria and down 0.6 percent in Galicia.

Stucklin also points out foreigners who are buying tend to be economic migrants from places like Morocco and Ecuador buying primary homes in or around Spain’s big cities.

“They won’t help mop up the glut of holiday homes on the coast,” he warned.

“There are tens, if not hundreds of thousands of holiday homes for sale on the coast that will need to attract foreign buyers in large numbers if the holiday home glut is to be dealt with anytime soon.”

Last week a new report from Spain’s Property Registrars suggested transactions are bottoming out, though it is still too early to declare a recovery under way.

The number of property deeds of sale recorded in the property registry rose by 7 percent in the first quarter of 2010 compared to the same period last year.

This is the first time in several years that annualised sales have risen in a quarter.

The report cautions against declaring a recovery under way. They point out that temporary factors such as the imminent increase in VAT on home sales, and elimination of tax relief on mortgage payments, could be bringing forward sales and boosting the figures temporarily.