Property prices

At the end of Q1 2012, the cost of paying off a mortgage took up 29pc of average annual household income, according to figures from the Bank of Spain.

That is just a fraction less than the end of last year, despite falling house prices, suggesting that mortgage costs are going up even though house prices and base rates are falling. That can only mean that lenders are increasing their spreads.

Experts recommend that households spend no more than a third of income on mortgage repayments, so the latest figures could be taken to suggest that house prices have now fallen back to sustainable levels in relation to income, or even below.

However, strip out the effects of mortgage tax relief – recently re-introduced by the Government – and housing affordability doesn’t look so good, with Spanish households spend 36pc of income on mortgage payments.

Another way of looking at housing affordability is to divide the average house price over the average household income, giving you house prices in years of average income, or how many years income you need to buy a home.

By this measure, Spanish house prices now equal 6.1 years of income, which is way above the long-term average of around 4 years, before you start taking into account factors like Spain’s 25pc unemployment, which means that a significant proportion of Spanish households have no income whatsoever.

Whichever way you look at it, average Spanish house prices have some way to fall, at least according to official figures.

But as regular readers are well aware, official figures for Spanish house prices are detached from reality, so you can never be sure what conclusions to draw from them.

At the end of Q1 2012, the cost of paying off a mortgage took up 29pc of average annual household income, according to figures from the Bank of Spain.

That is just a fraction less than the end of last year, despite falling house prices, suggesting that mortgage costs are going up even though house prices and base rates are falling. That can only mean that lenders are increasing their spreads.

Experts recommend that households spend no more than a third of income on mortgage repayments, so the latest figures could be taken to suggest that house prices have now fallen back to sustainable levels in relation to income, or even below.

However, strip out the effects of mortgage tax relief – recently re-introduced by the Government – and housing affordability doesn’t look so good, with Spanish households spend 36pc of income on mortgage payments.

Another way of looking at housing affordability is to divide the average house price over the average household income, giving you house prices in years of average income, or how many years income you need to buy a home.

By this measure, Spanish house prices now equal 6.1 years of income, which is way above the long-term average of around 4 years, before you start taking into account factors like Spain’s 25pc unemployment, which means that a significant proportion of Spanish households have no income whatsoever.

Whichever way you look at it, average Spanish house prices have some way to fall, at least according to official figures.

But as regular readers are well aware, official figures for Spanish house prices are detached from reality, so you can never be sure what conclusions to draw from them.

Property prices on the coast fell 14pc in April, according to leading appraisal company Tinsa

Spanish house prices fell 12.5pc over 12 months to the end of April, according to the Tinsa House Price Index.

Prices on the coast, where most holiday-homes are located, fell 13.7pc, whilst prices on the Canary and Balearic Islands fell 12.3pc.

April saw the biggest falls in house prices in all areas since the crash began back in March 2008, when prices began falling according to Tinsa’s index.

Peak to present, prices have now fallen 30pc in general, 37pc on the coast, and 27pc on the islands.

You can see from the chart above that prices originally fell fast at the start of the crisis, but then appeared to recover as banks manipulated the market keeping prices artificially high. Now prices are accelerating down again as the banks come unstuck, in large part for failing to deal with their property problems in the first place.

Property prices on the coast fell 14pc in April, according to leading appraisal company Tinsa

Spanish house prices fell 12.5pc over 12 months to the end of April, according to the Tinsa House Price Index.

Prices on the coast, where most holiday-homes are located, fell 13.7pc, whilst prices on the Canary and Balearic Islands fell 12.3pc.

April saw the biggest falls in house prices in all areas since the crash began back in March 2008, when prices began falling according to Tinsa’s index.

Peak to present, prices have now fallen 30pc in general, 37pc on the coast, and 27pc on the islands.

You can see from the chart above that prices originally fell fast at the start of the crisis, but then appeared to recover as banks manipulated the market keeping prices artificially high. Now prices are accelerating down again as the banks come unstuck, in large part for failing to deal with their property problems in the first place.

All things considered, house prices in Madrid didn’t do too badly last quarter in a global city ranking published by Knight Frank.

Property prices in Madrid fell just 4.3pc over 12 months to the end of March, less than cities like Paris, Geneva, Shanghai, Monaco, and Sydney.

Mind you, the figures do smell a bit fishy. I can’t believe that property prices are falling less in Madrid than Geneva. That doesn’t make any sense (though it does make sense if you consider that Knight Frank use official figures, which as regular readers will know, are highly suspect in Spain):

Interesting to note that Miami is enjoying a strong recovery with prices up almost 14pc in a year, to some extent because prices fell so quickly in the crash. If only Spain had done the same we might be seeing some light at the end of the tunnel.

All things considered, house prices in Madrid didn’t do too badly last quarter in a global city ranking published by Knight Frank.

Property prices in Madrid fell just 4.3pc over 12 months to the end of March, less than cities like Paris, Geneva, Shanghai, Monaco, and Sydney.

Mind you, the figures do smell a bit fishy. I can’t believe that property prices are falling less in Madrid than Geneva. That doesn’t make any sense (though it does make sense if you consider that Knight Frank use official figures, which as regular readers will know, are highly suspect in Spain):

Interesting to note that Miami is enjoying a strong recovery with prices up almost 14pc in a year, to some extent because prices fell so quickly in the crash. If only Spain had done the same we might be seeing some light at the end of the tunnel.

Asking prices for Spanish homes fell 9.5pc over 12 months to the end of April, according to data from Idealista.com, a leading Spanish property portal.

With Spain back in recession, and banks refusing to lend on anything but their own properties, home owners trying to sell have no alternative but to drop their prices. Judging by the ongoing collapse in sales, it looks like it hasn’t been enough.

The average resale property in Spain now has an asking prices of 1,993 €/m2, down from 2,202 €/m2 a year ago. On a monthly basis, asking prices fell 1pc in April.

Asking prices fell the most in Castilla La Mancha, Navarra , Murcia, and Extremadura, and the least in Castilla y Leon, La Rioja and Galicia.

You can read the full monthly house (asking) price index report from Idealista here (pdf in Spanish)

Asking prices for Spanish homes fell 9.5pc over 12 months to the end of April, according to data from Idealista.com, a leading Spanish property portal.

With Spain back in recession, and banks refusing to lend on anything but their own properties, home owners trying to sell have no alternative but to drop their prices. Judging by the ongoing collapse in sales, it looks like it hasn’t been enough.

The average resale property in Spain now has an asking prices of 1,993 €/m2, down from 2,202 €/m2 a year ago. On a monthly basis, asking prices fell 1pc in April.

Asking prices fell the most in Castilla La Mancha, Navarra , Murcia, and Extremadura, and the least in Castilla y Leon, La Rioja and Galicia.

You can read the full monthly house (asking) price index report from Idealista here (pdf in Spanish)

A new report on the Spanish housing market in 2011, prepared by Pompeu Fabra University and commissioned by the Tecnocasa propety group, finds that house prices have fallen 41pc since the peak.

That is much higher than the peak-to-present fall of around 20pc presented by the Government’s figures, which most international analysts and organisations use when trying to judge if Spanish property prices have fallen enough. Unsurprisingly, most of them assume that Spanish property prices are still heavily over-valued.

The Tecnocasa report is based on data from house sales brokered by their network of agents in Barcelona, Madrid, Malaga, Seville, Valencia and Zaragoza, using actual sales prices, rather than valuations. That might explain why Tecnocasa’s findings look more accurate than official figures.

The report also reveals that that house prices fell 19.2pc in 2011 alone, and that house prices declined at an accelerating rate in the last 6 months of last year.

“Far from being over, the adjustment in Spanish house prices has intensified in the last year,” says the report. “This is nothing but a reflection of a sector that has returned to paralysis after the fiscal stimulus of 2010 wore off.”

+ Tecnocasa report (pdf in Spanish)

A new report on the Spanish housing market in 2011, prepared by Pompeu Fabra University and commissioned by the Tecnocasa propety group, finds that house prices have fallen 41pc since the peak.

That is much higher than the peak-to-present fall of around 20pc presented by the Government’s figures, which most international analysts and organisations use when trying to judge if Spanish property prices have fallen enough. Unsurprisingly, most of them assume that Spanish property prices are still heavily over-valued.

The Tecnocasa report is based on data from house sales brokered by their network of agents in Barcelona, Madrid, Malaga, Seville, Valencia and Zaragoza, using actual sales prices, rather than valuations. That might explain why Tecnocasa’s findings look more accurate than official figures.

The report also reveals that that house prices fell 19.2pc in 2011 alone, and that house prices declined at an accelerating rate in the last 6 months of last year.

“Far from being over, the adjustment in Spanish house prices has intensified in the last year,” says the report. “This is nothing but a reflection of a sector that has returned to paralysis after the fiscal stimulus of 2010 wore off.”

+ Tecnocasa report (pdf in Spanish)

Leading appraisal company Tinsa have started publishing their House Price Index with a regional breakdown.

The map above shows you how asking prices have changed by autonomous region over 12 months to the end of March. The percentage change is on top, and the latest average price in €/m2 for each region in the box below.

Prices have fallen the most in the North-East, at least according to Tinsa’s figures, lead by Aragon (-16.2pc), Navarre (-16pc) and Catalonia (-12.8pc).

+ Full report from Tinsa (pdf in Spanish)

Leading appraisal company Tinsa have started publishing their House Price Index with a regional breakdown.

The map above shows you how asking prices have changed by autonomous region over 12 months to the end of March. The percentage change is on top, and the latest average price in €/m2 for each region in the box below.

Prices have fallen the most in the North-East, at least according to Tinsa’s figures, lead by Aragon (-16.2pc), Navarre (-16pc) and Catalonia (-12.8pc).

+ Full report from Tinsa (pdf in Spanish)

Spanish bank BBVA also expect property prices to continue falling this year

The British investment bank Barclays Capital say Spanish house prices could fall another 18pc before they bottom out, according to their latest report.

Barclays Capital base their numbers on official figures showing a 7.2pc fall in property prices over 12 months to the end of March, and that would have us believe that prices have fallen a total of 22pc since the boom ended.

The problem with that is, as regular readers will know, that the official figures are largely unreliable and do not reflect the true fall in house prices that have taken place since the Spanish property market started to turn down in 2008.

Using official figures for their calculations, Barclays Capital warn that overall drop in prices could reach 35pc to 40pc before the market bottoms, but in reality that size of a correction has already taken place. Even Spain’s Minister for the Economy says house prices are already down by 35pc.

So Barclays Capital are right to say that prices might fall 40pc in total, but wrong to say that means another 18pc of declines to come. We are already almost there, certainly when it comes to holiday homes on the coast.

BBVA, one of Spain’s largest banks, has also recently published a new report forecasting further house price declines, citing the recession and the new credit crunch as to driving further reductions.

Spanish house prices have fallen back to where they where seven years ago, according to the Government’s House Price Index (Fomento).

House prices fell 7.2pc in Q1 compared to the same time last year.

The average cost of housing in Euros/m2 now stands at 1,649€/m2, basically where it was at the start of 2005, when the Government first started publishing this particular index.

This index isn’t very reliable but it does help to illustrate the house prices are clearly going down (see chart above).

Spanish house prices have fallen back to where they where seven years ago, according to the Government’s House Price Index (Fomento).

House prices fell 7.2pc in Q1 compared to the same time last year.

The average cost of housing in Euros/m2 now stands at 1,649€/m2, basically where it was at the start of 2005, when the Government first started publishing this particular index.

This index isn’t very reliable but it does help to illustrate the house prices are clearly going down (see chart above).

The biggest annualised fall in Spanish property prices since the crisis began.

Average Spanish house prices fell 11.5pc in March compared to the same time last year, according to the latest data from Tinsa, one of Spain’s biggest appraisal companies.

That represents the biggest fall in the index since the crisis began and since Tinsa started publishing this index.

Housing on the coast, where most holiday homes are located, fell 10,79pc, marginally less than the national average. Prices in the Balearics and the Canaries were down 9.71pc.

Peak (Dec. 2007) to present, average national prices have fallen 28.6pc and by 35pc on the coast, all according to the Tinsa Index.

The biggest annualised fall in Spanish property prices since the crisis began.

Average Spanish house prices fell 11.5pc in March compared to the same time last year, according to the latest data from Tinsa, one of Spain’s biggest appraisal companies.

That represents the biggest fall in the index since the crisis began and since Tinsa started publishing this index.

Housing on the coast, where most holiday homes are located, fell 10,79pc, marginally less than the national average. Prices in the Balearics and the Canaries were down 9.71pc.

Peak (Dec. 2007) to present, average national prices have fallen 28.6pc and by 35pc on the coast, all according to the Tinsa Index.

The average home in Spain costs 7.8 years of wages according to a study by the Savings Banks’ Foundation (Funcas).

The map above shows the housing affordability ratio by region (house prices / annual wages), colour-coded from dark red (least affordable) to green (most affordable).

Relative to incomes, the Basque Country and the Balearics are the most expensive places to buy property in Spain, whilst Extremadur and Castille & Leon are the cheapest.

A national average affordability ratio of 7.86 despite the worst property crash in history suggest that Spanish property prices are still too high. The study as reported in the Spanish press, however, did not provide comparisons to other countries or Spain’s long-term average, so it is difficult to judge.

Furthermore, the study almost certainly used official house-prices, which as regular readers will know, grossly overstate the real cost of property in Spain.

If it is true that Spanish property prices are still too high in relation to incomes, then either prices must fall (likely) or wages must rise (very unlikely).

The average home in Spain costs 7.8 years of wages according to a study by the Savings Banks’ Foundation (Funcas).

The map above shows the housing affordability ratio by region (house prices / annual wages), colour-coded from dark red (least affordable) to green (most affordable).

Relative to incomes, the Basque Country and the Balearics are the most expensive places to buy property in Spain, whilst Extremadur and Castille & Leon are the cheapest.

A national average affordability ratio of 7.86 despite the worst property crash in history suggest that Spanish property prices are still too high. The study as reported in the Spanish press, however, did not provide comparisons to other countries or Spain’s long-term average, so it is difficult to judge.

Furthermore, the study almost certainly used official house-prices, which as regular readers will know, grossly overstate the real cost of property in Spain.

If it is true that Spanish property prices are still too high in relation to incomes, then either prices must fall (likely) or wages must rise (very unlikely).

At last, an official House Price Index figure from the National Institute of Statistics that looks half-credible

Spanish house prices fell 11.2pc in 2011 according to the official House Price Index published by the National Institute of Statistics (INE). New build prices fell 9pc and resale prices 14pc.

The headline figure is substantially worse, and more credible, than the 6.8pc fall reported by the Department of Housing and the 8pc fall reported by Tinsa, a leading Spanish appraisal company.

House prices fell the most in Madrid and Catalonia and the least in Murcia and the Canaries. Now that I don’t believe that for a second: In my experience, prices in Murcia are down much more than Madrid. Right now I can’t explain why the index seems to get it wrong when it comes to the regions.

And peak-to-present, prices are still only 20.6pc down (new builds -11.9pc and resales -27.7pc) according to the INE index, whilst everyone knows that prices are in fact down much more than that. Even the Spanish Minister of the Economy says prices are down 35pc.

Nevertheless, I can’t help thinking that an 11pc fall in average national prices in 2011 sounds about right.

The following graph shows the index since it started in Q1 2007, new build in blue, resale in red, and general index in grey.

The Spanish property market had a dismal year last year according to a global raking published by Knight Frank, an international estate agency.

Spain was ranked 48 out of 52 international real estate markets, with Spanish house prices down 6.8pc last year (based on official figures).

But Knight Frank’s index doesn’t tell the full story, at least as far as Spain is concerned. Using official figures (themselves based on valuations) the index understates the true extent of Spanish property price falls.

In reality, prices probably fell something more like 10pc last year (my guess), though probably not as much as Ireland (-16.7pc).

At the other end of the scale was Brazil, with (asking) prices up 26.3pc in a year. It’s only a matter of time before that market pops.

The Q4 results for last year represent the Global House Price index’s weakest quarterly performance since Q2 2009. “This suggests that a return to significant house price growth around the world is some way off yet,” said Kate Everett-Allen, of Knight Frank International Residential Research.

“No improvement is expected until the gap between house prices and two of its key determinants – incomes and rents – starts to shrink and the excess supply of new homes built in many locations during the boom years prior to 2008 is absorbed.”

Luis de Guindos, the Economy Minister, says house prices have fallen 35pc since the peak, much more than official figures suggest.

According to an article in the Spanish daily El Pais, de Guindos says it is his “impression that finished housing sells at a discount of 35pc compared to prices before the crisis.”

That’s not enough for De Guindos, who has introduced financial-sector reforms forcing banks to make bigger write-downs on their properties, with the stated objective of bringing down house prices.

De Guindos has criticised banks for only lending to buyers of their own properties to “maintain the fiction of the value of their properties,” something he hopes his reforms will discourage.

The reforms introduced by De Guindos had an immediate impact on vendor expectations, with a 30pc increase in asking price reductions (by an average of 9.5pc, or €26,200) in the week after De Guindos announced his banking reforms, according to figures from Idealista.com, a property portal (see chart below).

The “demand thermometer” tool from idealista.com, one of Spain’s leading property portals, allows us to see the difference between asking prices and what house-hunters are offering

On average, house-hunters offered 23pc less than asking prices in January, according to Idealista’s demand thermometer.

The biggest difference between asking prices and offers was in Malaga, home to the Costa del Sol, where house-hunters offered 29pc less than asking prices, followed by Soria (-28pc) and the Balearics (-27pc).

Differences of more than 25pc were also to be found in Girona (Costa Brava), Tarragona (Costa Dorada), Castellon (Costa Azahar), Murcia, and Almeria (Costa Calida), all popular locations with foreign holiday-home buyers.

So it seems there is still a big gulf between vendor expectations and what buyers are prepared to pay.

+ Idealista’s demand thermometer (in Spanish)