Property market

Foreigners might be buying more holiday-homes in Spain (see previous article) but it’s not enough to compensate for the collapse in Spanish demand for primary housing.

There were just 22,072 Spanish home sales in March (excluding social housing), 21pc less than a year ago and 28pc down in a month, according to the latest figures from the National Statistics Institute (INE).

2012 is turning out to be the worst year yet since Spain’s real estate bubble burst back in 2007, as illustrated by the chart above. Year to date the market is down 28pc on the same period last year.

The housing market in March was almost 70pc smaller than March 2007, when the boom was just starting to cool. Add in a price fall of, say, 30pc, and the market is down almost 80pc by value.

Unemployment heading for 25pc and a credit crunch in the Spanish banking sector help explain these remarkably awful figures.

The following table gives monthly house sales figures (excluding social housing) for the last 6 years. Click to enlarge.

Foreigners might be buying more holiday-homes in Spain (see previous article) but it’s not enough to compensate for the collapse in Spanish demand for primary housing.

There were just 22,072 Spanish home sales in March (excluding social housing), 21pc less than a year ago and 28pc down in a month, according to the latest figures from the National Statistics Institute (INE).

2012 is turning out to be the worst year yet since Spain’s real estate bubble burst back in 2007, as illustrated by the chart above. Year to date the market is down 28pc on the same period last year.

The housing market in March was almost 70pc smaller than March 2007, when the boom was just starting to cool. Add in a price fall of, say, 30pc, and the market is down almost 80pc by value.

Unemployment heading for 25pc and a credit crunch in the Spanish banking sector help explain these remarkably awful figures.

The following table gives monthly house sales figures (excluding social housing) for the last 6 years. Click to enlarge.

The biggest jump since 2002, taking the level of foreign investment in Spanish property back up to where it was in 2009, according to figures from the Bank of Spain.

What is driving this increase in foreign investment in Spanish real estate? At least part of it will be due to a significant increase in the number of foreigners buying holiday-homes and retirement homes on the Spanish coast, which some of the estate agents and developers I talk to have noted.

The biggest jump since 2002, taking the level of foreign investment in Spanish property back up to where it was in 2009, according to figures from the Bank of Spain.

What is driving this increase in foreign investment in Spanish real estate? At least part of it will be due to a significant increase in the number of foreigners buying holiday-homes and retirement homes on the Spanish coast, which some of the estate agents and developers I talk to have noted.

Monthly planning approvals for new homes are close to record lows, and might create a shortage in the next 5 years.

There were just 4,600 planning approvals for new homes in February, down 44pc on the same month last year, according to the latest figures from the Government (Fomento).

Compared to February 2006, when Spain’s building boom was in full swing, planning approvals are down 93pc. That just shows you how badly the Spanish house-building industry has been hit by the bust, as illustrated by the chart above. From being the driver of Spain’s economy it has collapsed to almost nothing, which helps explain why unemployment is close to 25pc and heading for 30pc.

As a result of the collapse in planning approvals, I believe there will be a shortage of newly-built homes in the next 3 to 5 years. This despite the fact that there is a glut of something like 750,000 newly-built homes on the market today.

The problem is that many of those homes are typical of what gets built at the peak of a boom: badly-built in a hurry, in undesirable locations, with scant regard to what house-hunters actually want. There is demand for new homes, just not those new homes.

As a rule of thumb, you should try to buy off-plan in the depths of the bust, not at the peak of the boom. In reality, though, most people do the opposite.

I forecast there will soon be a shortage, if there isn’t one already, of the kind of new homes that people actually want: better designed, better built, more generously-sized, more energy efficient, better located, and significantly cheaper. And that is what developers building today can offer.

The problem is, there are hardly any developers left standing, as you can see from February’s planning approvals.

Monthly planning approvals for new homes are close to record lows, and might create a shortage in the next 5 years.

There were just 4,600 planning approvals for new homes in February, down 44pc on the same month last year, according to the latest figures from the Government (Fomento).

Compared to February 2006, when Spain’s building boom was in full swing, planning approvals are down 93pc. That just shows you how badly the Spanish house-building industry has been hit by the bust, as illustrated by the chart above. From being the driver of Spain’s economy it has collapsed to almost nothing, which helps explain why unemployment is close to 25pc and heading for 30pc.

As a result of the collapse in planning approvals, I believe there will be a shortage of newly-built homes in the next 3 to 5 years. This despite the fact that there is a glut of something like 750,000 newly-built homes on the market today.

The problem is that many of those homes are typical of what gets built at the peak of a boom: badly-built in a hurry, in undesirable locations, with scant regard to what house-hunters actually want. There is demand for new homes, just not those new homes.

As a rule of thumb, you should try to buy off-plan in the depths of the bust, not at the peak of the boom. In reality, though, most people do the opposite.

I forecast there will soon be a shortage, if there isn’t one already, of the kind of new homes that people actually want: better designed, better built, more generously-sized, more energy efficient, better located, and significantly cheaper. And that is what developers building today can offer.

The problem is, there are hardly any developers left standing, as you can see from February’s planning approvals.

A new study by consultants Acuña & Asociados estimates there are almost two million homes for sale in Spain (see table above), which will take 10 years to sell.

The 2 million figure is comprised of newly built homes and resale properties, which means the total housing inventory on the market.

That sounds like a lot, but is it? It depends how it compares to the overall housing stock, and how that compares to other countries. It also depends upon the turnover rate – i.e. how quickly homes sell in Spain.

Assuming there are 26.5 million residential properties in Spain (there were 25.8 at the end of 2010, according to Government/Fomento figures), that means that roughly 7.5pc of the housing stock is on the market.

I don’t have figures from other countries to compare to (after a fruitless search), but I wouldn’t be surprised if it is a lot higher the EU average. All of which would suggest that Spain has a big oversupply of property for sale, compared to other counties. I’m sure many readers will be thinking “tell me something I didn’t know.”

Another way to judge the oversupply is to estimate how long the inventory might take to sell, using the current sales rate and estimates of future demand (household formation). Acuña & Asociados calculate it will take 10 years for the inventory to sell, assuming household formation of 200,000 a year between now and 2020.

10 years to turnover the current housing inventory (for sale) is a big problem that will be with us for years to come. All of which suggest that downward pressure on prices won’t go away anytime soon. Good news for (cash) buyers, but bad news for builders and vendors.

Acuña & Asociados also estimate there is a land-bank to build another 4 million homes, which won’t be needed for years. Guess who owns the land? Basically, the banks, either directly or indirectly.

If these figures are correct, how much do you think that land is worth? You don’t need an economics degree to work it out, and what it means for the balance sheet of the Spanish banking system.

The only way Spain is going to get out of this hole is a combination of 1) economic growth creating jobs and demand for homes, 2) selling lots more properties to foreign buyers, and 3) high inflation reducing the real value of debts and making property an attractive investment. I’m expecting the inflation, but I’m not so sure about the other two.

A new study by consultants Acuña & Asociados estimates there are almost two million homes for sale in Spain (see table above), which will take 10 years to sell.

The 2 million figure is comprised of newly built homes and resale properties, which means the total housing inventory on the market.

That sounds like a lot, but is it? It depends how it compares to the overall housing stock, and how that compares to other countries. It also depends upon the turnover rate – i.e. how quickly homes sell in Spain.

Assuming there are 26.5 million residential properties in Spain (there were 25.8 at the end of 2010, according to Government/Fomento figures), that means that roughly 7.5pc of the housing stock is on the market.

I don’t have figures from other countries to compare to (after a fruitless search), but I wouldn’t be surprised if it is a lot higher the EU average. All of which would suggest that Spain has a big oversupply of property for sale, compared to other counties. I’m sure many readers will be thinking “tell me something I didn’t know.”

Another way to judge the oversupply is to estimate how long the inventory might take to sell, using the current sales rate and estimates of future demand (household formation). Acuña & Asociados calculate it will take 10 years for the inventory to sell, assuming household formation of 200,000 a year between now and 2020.

10 years to turnover the current housing inventory (for sale) is a big problem that will be with us for years to come. All of which suggest that downward pressure on prices won’t go away anytime soon. Good news for (cash) buyers, but bad news for builders and vendors.

Acuña & Asociados also estimate there is a land-bank to build another 4 million homes, which won’t be needed for years. Guess who owns the land? Basically, the banks, either directly or indirectly.

If these figures are correct, how much do you think that land is worth? You don’t need an economics degree to work it out, and what it means for the balance sheet of the Spanish banking system.

The only way Spain is going to get out of this hole is a combination of 1) economic growth creating jobs and demand for homes, 2) selling lots more properties to foreign buyers, and 3) high inflation reducing the real value of debts and making property an attractive investment. I’m expecting the inflation, but I’m not so sure about the other two.

The market appears to be entering its worst year yet

There were 26,300 home sales in February (excluding social housing), 33pc down on the same month last year, and 8pc down on January, according to the latest figures from the National Institute of Statistics (INE).

The 33pc fall in February comes after a 28pc fall in January, meaning that after the first 2 months this is the worst year since the crisis began, as you can see from the chart above.

Year-to-date, the Spanish property market is 63pc smaller in volume terms than it was in 2007. Taking into account price falls between 30pc and 50pc, the market has shrunk by 80pc or more in value terms.

The following chart illustrates how home sales collapsed in February this year, after improving a fraction in the previous 2 years. There are many explanations for this, including the return of the credit crunch, a new recession and surging unemployment, and banks not distorting sales figures to suit their balance sheets.

And finally, a table summarising monthly sales figures (exc. social housing) over the last 6 years:

The market appears to be entering its worst year yet

There were 26,300 home sales in February (excluding social housing), 33pc down on the same month last year, and 8pc down on January, according to the latest figures from the National Institute of Statistics (INE).

The 33pc fall in February comes after a 28pc fall in January, meaning that after the first 2 months this is the worst year since the crisis began, as you can see from the chart above.

Year-to-date, the Spanish property market is 63pc smaller in volume terms than it was in 2007. Taking into account price falls between 30pc and 50pc, the market has shrunk by 80pc or more in value terms.

The following chart illustrates how home sales collapsed in February this year, after improving a fraction in the previous 2 years. There are many explanations for this, including the return of the credit crunch, a new recession and surging unemployment, and banks not distorting sales figures to suit their balance sheets.

And finally, a table summarising monthly sales figures (exc. social housing) over the last 6 years:

Homebuyers without savings, and 100pc mortgages will be a thing of the past predicts the G-14 developers’ association

110pc mortgages and property speculators without any capital were a typical feature of Spain’s property boom, but buyers in future will need to stump up as much as 30pc of the purchase price out of their own savings, predicts Fernando Rodríguez-Avial (pictured above), President of the G-14 association of Spain’s leading developers (few of which are having a good crisis).

Rodríguez-Avial also predicts that the Spanish property sector will become healthier, smaller, more transparent, with better statistics, and first-time house hunters who increasingly opt for renting over buying. He says Spain made an “enormous error” by undermining the rental market and favouring buying over renting.

Participating in a recent conference on the housing market, organised by consultants Pwc, Rodríguez-Avial admitted that the residential sector is in deep crisis with few financially-healthy developers and many companies at risk of disappearing.

Homebuyers without savings, and 100pc mortgages will be a thing of the past predicts the G-14 developers’ association

110pc mortgages and property speculators without any capital were a typical feature of Spain’s property boom, but buyers in future will need to stump up as much as 30pc of the purchase price out of their own savings, predicts Fernando Rodríguez-Avial (pictured above), President of the G-14 association of Spain’s leading developers (few of which are having a good crisis).

Rodríguez-Avial also predicts that the Spanish property sector will become healthier, smaller, more transparent, with better statistics, and first-time house hunters who increasingly opt for renting over buying. He says Spain made an “enormous error” by undermining the rental market and favouring buying over renting.

Participating in a recent conference on the housing market, organised by consultants Pwc, Rodríguez-Avial admitted that the residential sector is in deep crisis with few financially-healthy developers and many companies at risk of disappearing.

The market is off to a bad start in 2012 with the lowest level of sales in January since the crisis began.

There 28,505 home sales in January (excluding social housing), down 28pc on the same time last year and 63pc compared to 2007.

It’s the lowest level of sales in January since the crisis began, so no clear sign of any recovery in the air.

In value terms (transactions x average price) the market is down more than 75pc.

The only good news is that sales in January were the highest in 10 months, which may or may not suggest a slight improvement in conditions. We will have to wait and see.

The following table summarises monthly sales figures (exc. social housing) over the last 6 years:

The market is off to a bad start in 2012 with the lowest level of sales in January since the crisis began, according to figures from the National Institute of Statistics (INE).

There 28,505 home sales in January (excluding social housing), down 28pc on the same time last year and 63pc compared to 2007.

It’s the lowest level of sales in January since the crisis began, so no clear sign of any recovery in the air.

In value terms (transactions x average price) the market is down more than 75pc.

The only good news is that sales in January were the highest in 10 months, which may or may not suggest a slight improvement in conditions. We will have to wait and see.

The following table summarises monthly sales figures (exc. social housing) over the last 6 years:

The Spanish housing market shrank 29.3pc in volume terms (transactions), according to the latest data from the Housing Department in the Ministry of Public Works.

As a result there were 347,305 homes sales in 2011, the lowest level since the crisis began and 64pc down on 2006, when 955,186 homes were sold.

On a quarterly basis there were 105,560 sales in Q4, 38pc more than the previous quarter (there is normally a bounce at the end of the year), but 30pc down Q4 2010, which is the figure that counts..

These figures are worse than the 20pc annual fall reported by the National Institute of Statistics (INE), which I reported in this article last month: Spanish property market shrinks 20pc in 2011.

Whichever source is more accurate it is clear that the Spanish housing market is still contracting, in part due to the on-going credit crunch (new mortgage lending has also collapsed).

If you look at the market in value terms (transacations x average price), with prices down 35pc according to the Minister for the Economy, then the market has shrunk 77% since the peak.

The Spanish housing market shrank 29.3pc in volume terms (transactions), according to the latest data from the Housing Department in the Ministry of Public Works.

As a result there were 347,305 homes sales in 2011, the lowest level since the crisis began and 64pc down on 2006, when 955,186 homes were sold.

On a quarterly basis there were 105,560 sales in Q4, 38pc more than the previous quarter (there is normally a bounce at the end of the year), but 30pc down Q4 2010, which is the figure that counts..

These figures are worse than the 20pc annual fall reported by the National Institute of Statistics (INE), which I reported in this article last month: Spanish property market shrinks 20pc in 2011.

Whichever source is more accurate it is clear that the Spanish housing market is still contracting, in part due to the on-going credit crunch (new mortgage lending has also collapsed).

If you look at the market in value terms (transacations x average price), with prices down 35pc according to the Minister for the Economy, then the market has shrunk 77% since the peak.

The Spanish housing market shrank 29.3pc in volume terms (transactions), according to the latest data from the Housing Department in the Ministry of Public Works.

As a result there were 347,305 homes sales in 2011, the lowest level since the crisis began and 64pc down on 2006, when 955,186 homes were sold.

On a quarterly basis there were 105,560 sales in Q4, 38pc more than the previous quarter (there is normally a bounce at the end of the year), but 30pc down Q4 2010, which is the figure that counts..

These figures are worse than the 20pc annual fall reported by the National Institute of Statistics (INE), which I reported in this article last month: Spanish property market shrinks 20pc in 2011.

Whichever source is more accurate it is clear that the Spanish housing market is still contracting, in part due to the on-going credit crunch (new mortgage lending has also collapsed).

If you look at the market in value terms (transacations x average price), with prices down 35pc according to the Minister for the Economy, then the market has shrunk 77% since the peak.

The Spanish housing market shrank 29.3pc in volume terms (transactions), according to the latest data from the Housing Department in the Ministry of Public Works.

As a result there were 347,305 homes sales in 2011, the lowest level since the crisis began and 64pc down on 2006, when 955,186 homes were sold.

On a quarterly basis there were 105,560 sales in Q4, 38pc more than the previous quarter (there is normally a bounce at the end of the year), but 30pc down Q4 2010, which is the figure that counts..

These figures are worse than the 20pc annual fall reported by the National Institute of Statistics (INE), which I reported in this article last month: Spanish property market shrinks 20pc in 2011.

Whichever source is more accurate it is clear that the Spanish housing market is still contracting, in part due to the on-going credit crunch (new mortgage lending has also collapsed).

If you look at the market in value terms (transacations x average price), with prices down 35pc according to the Minister for the Economy, then the market has shrunk 77% since the peak.

The map below uses deeper shades of red to show where sales have fallen the most. You only need a glance to see the biggest problem is on the coast.

Given structural declines in demand for housing in Spain, we’ll never see another boom like the last one argues one expert.

“Spaniards of the baby-boom generation went en mass to military service, then to university, and after that to buying a house. But that’s all over.” So said José Luis Jimeno, head of the property company Noteges, quoted in the press, explaining why he thinks we’ll never see a boom like the last one. The collapse in Spanish fertility rates to one of the lowest levels in the world, well below the replacement rate, means there will not be enough future demand to fuel another boom.

Jimeno’s argument is reflected in a recent report on household formation by CatalunyaCaixa, a Spanish savings bank. According to CatalunyaCaixa, household formation (the number of new families) will fall from 400,000 at the peak of the boom, to a forecast of 80,000 in 2015. Fewer Spanish families means lower demand for housing of all types, not least holiday-homes. It follows that Spain will become steadily more reliant of foreign buyers, assuming they can be tempted back to Spain by lower prices.

But in one way “the crisis has been good for us,” argues Jimeno, who says that the only people selling now are forced sellers. “Beforehand everything sold, and the explosion in demand made up for the deficiencies of vendors. That’s no longer the case.” In other words, standards are improving.

Given structural declines in demand for housing in Spain, we’ll never see another boom like the last one argues one expert.

“Spaniards of the baby-boom generation went en mass to military service, then to university, and after that to buying a house. But that’s all over.” So said José Luis Jimeno, head of the property company Noteges, quoted in the press, explaining why he thinks we’ll never see a boom like the last one. The collapse in Spanish fertility rates to one of the lowest levels in the world, well below the replacement rate, means there will not be enough future demand to fuel another boom.

Jimeno’s argument is reflected in a recent report on household formation by CatalunyaCaixa, a Spanish savings bank. According to CatalunyaCaixa, household formation (the number of new families) will fall from 400,000 at the peak of the boom, to a forecast of 80,000 in 2015. Fewer Spanish families means lower demand for housing of all types, not least holiday-homes. It follows that Spain will become steadily more reliant of foreign buyers, assuming they can be tempted back to Spain by lower prices.

But in one way “the crisis has been good for us,” argues Jimeno, who says that the only people selling now are forced sellers. “Beforehand everything sold, and the explosion in demand made up for the deficiencies of vendors. That’s no longer the case.” In other words, standards are improving.

Banking reforms being pushed through by the new Government will hit holiday-home prices the hardest, according to a recent article in the Spanish financial daily Cinco Días.

The new Government has introduced reforms to bring down house prices and get banks lending again, but some experts say the measures will mainly hit the price of holiday-homes on the coast, where around 65pc of Spain’s unsold new homes are located.

The price of main homes in Spanish cities, in contrast, has already adjusted enough, argues Josep Oliver, Economics Professor at the Autonomous University of Barcelona. “There is not much room left for price declines,” the article quotes him as saying. “Discounts of up to 50pc are only being considered for holiday-homes or unfinished new-developments.”

A mismatch between supply and demand means lower house prices might not stimulate the market. “Whilst the stock grows in holiday-home areas, demand is focused on big cities and provincial capitals where there is little excess and prices have already adjusted,” explains Oliver. So if the financial reforms put downward pressure on prices, it might only be felt on the coast, especially the least popular destinations with too much supply.

Costa del Glut

Almost 65pc of Spain’s new housing glut of 800,000 new homes was built on the coast with holiday-home buyers in mind, mostly in Catalonia, the Balearics, the Valencian Region, Murcia and Andalucia, according to a recent report by CatalunyaCaixa, a savings bank.

The Valencian Community has the biggest problem, with 210,000 unsold new homes, or 26% of the glut, followed by Andalucia with 137,000 and Catalonia with 107,000.

The province with the biggest problem by far is Castellón, in the North of the Valencian Region, and home to the so-called Orange-blossom coast (Costa del Azahar), with around 114,000 empty new homes, compared to 57,000 in Barcelona and Alicante (Costa Blanca), 52,000 in Murcia, and 40,000 in Valencia province.

That means Castellón, a relatively unheard of destination with a new airport that nobody yet flies to, is responsible for around 20pc of the entire Spanish glut of new holiday-homes. New developments in Castellón like Marina D’or development (pictured below) help explain why.

The excess inventory of new homes in Malaga province, home to the Costa del Sol, is relatively minor in comparison. According to local builders there are less than 20,000 new homes on the market, most of which will have sold in the next couple of years. The Costa del Sol is a mature market with good access and diversified international demand where almost everything sells in due course.

The Costa del Azhar is a different story. Who will buy 114,000 new holiday-homes there in any reasonable time-frame? What if prices get really cheap there? Will that help, or is there no demand at any price?

The Spanish property market contracted by 19.8pc in 2011 after the feeble recovery of 2010 ran out of steam.

2011 was the worst year on record since Spain’s property boom turned to bust, as illustrated by the chart above.

There were just 313,637 homes sales in 2011 (excluding social housing), down 20pc on 2010 and 56pc (that’s right, more than half) on 2007.

In value terms, the market has shriveled up to 30pc or less than what it was in the go-go years.

If anything, the trend got worse towards the end of the year, with December down 26pc compared to the year before, considerably worse than the -17 YOY in November.

There was nothing about 2011 to suggest a recovery anytime soon. That said, it’s difficult to imagine that 2012 could be any worse. My guess is that prime segments will touch bottom in 2012, if they haven’t already, then track sideways for a year or more. That would be good news of a sort.

Non-prime will just carry on going down.

The following table summarise all the key transaction data for the last 5 years:

More new homes are still being finished than sold according to research by Catalunyacaixa, a savings bank.

There were 818,000 new homes on the market at the end of September 2011, 3pc more than a year earlier, as the completion of new homes started at the tail end of the boom still outnumbers sales.

The following charts illustrate this problem:

The first chart shows how supply (grey bars) is still larger than demand (red bars). The second chart shows the overall stock of new homes, and the last chart shows that stock as a percentage of the overall housing stock.

Collapse in new household formation

One of the big problems for both the Spanish economy and the housing market is the precipitous decline in new household formation – the main driver of demand for new housing. As you can see from the middle chart below (gráfico 4), this has collapsed since 2006 and is expected to remain at record lows until at least 2015.

Spanish house prices fell for the 5th consecutive year in 2011, according to data from Idealista.com (based on asking prices), a leading property-portal.

The average asking price is now 20pc below the high reached at the end of 2007, and back to where it was in 2004, when the boom had run about half its course. The chart above illustrates this with data from Madrid (blue line) and Barcelona (orange).

But house-hunters are still not satisfied, according to Idealista’s ‘Demand Thermometer’. Potential buyers are looking for an additional discount of 21pc on average before they jump in.

As always, asking price reductions have not been uniform across the country: In some areas, like Lleida (Catalonia) and Puente de Vallecas (Madrid), asking prices are already down by more than 40pc.

As far as all other housing market indicators go, 2011 was another bad year, if not the worst since the crisis began (final data will not be in for a few months). Property sales, house building, mortgage lending and confidence all tumbled to new lows, whilst repossessions hit new highs.

Outlook for 2012

Property price falls accelerated towards the end of 2011, boding ill for 2012. Most market watchers expect prices to continue falling in 2012, as banks slash prices to shift their properties, and private vendors follow suit as the credit crunch drives down budgets.

I agree that 2012 will be another bad year for the Spanish property market as a whole, but I also think it could be the start of better times on the coast for 1) quality, up-market areas with diversified international demand and 2) low-cost property in well-consolidated areas. Bargain-hunters from non-Euro countries like the UK, Norway, Switzerland and Russia, will be on the prowl as a weaker Euro and falling property prices combine to attract the curiosity of investors.

But all bets are off in the event of a major macro-economic shock in 2012.

Spanish house prices fell for the 5th consecutive year in 2011, according to data from Idealista.com (based on asking prices), a leading property-portal.

The average asking price is now 20pc below the high reached at the end of 2007, and back to where it was in 2004, when the boom had run about half its course. The chart above illustrates this with data from Madrid (blue line) and Barcelona (orange).

But house-hunters are still not satisfied, according to Idealista’s ‘Demand Thermometer’. Potential buyers are looking for an additional discount of 21pc on average before they jump in.

As always, asking price reductions have not been uniform across the country: In some areas, like Lleida (Catalonia) and Puente de Vallecas (Madrid), asking prices are already down by more than 40pc.

As far as all other housing market indicators go, 2011 was another bad year, if not the worst since the crisis began (final data will not be in for a few months). Property sales, house building, mortgage lending and confidence all tumbled to new lows, whilst repossessions hit new highs.

Outlook for 2012

Property price falls accelerated towards the end of 2011, boding ill for 2012. Most market watchers expect prices to continue falling in 2012, as banks slash prices to shift their properties, and private vendors follow suit as the credit crunch drives down budgets.

I agree that 2012 will be another bad year for the Spanish property market as a whole, but I also think it could be the start of better times on the coast for 1) quality, up-market areas with diversified international demand and 2) low-cost property in well-consolidated areas. Bargain-hunters from non-Euro countries like the UK, Norway, Switzerland and Russia, will be on the prowl as a weaker Euro and falling property prices combine to attract the curiosity of investors.

But all bets are off in the event of a major macro-economic shock in 2012.