Search:     Go  
The Spanish Lawyer Online
The Spanish Lawyer Online

Spanish Law Tribune

Keeping up-to-date with Spanish Law
Home > Property > Bank Santander Estimates Property Prices in Spain Fell an Average of 50% on the Costas and 30% in Cities

Bank Santander Estimates Property Prices in Spain Fell an Average of 50% on the Costas and 30% in Cities

April 21st, 2010

Bank Santander released yesterday a report titled “The Contrarian View” which upholds that market adjustment in Spain’s property sector has now almost concluded. Indeed, living up to its name, it’s a contrarian view.

They estimate property prices have fallen on average 20 to 30% in large Spanish cities. These properties are in the vast majority main residences. The major fall has taken place on the Spanish costas, which are mainly second homes or foreigner’s overseas summer homes. They estimate the average fall in this segment reaches 50%.

In their report they estimate the real estate market peaked out in 2007.  They forecast that Spain’s GDP will resume feeble growth in 2011 picking up pace on the following years.

I find unsurprising the fact that main residences have fallen less than their second home counterparts; that was reasonably in line with what everybody expected.

What I find surprising is the report claiming that property prices have fallen 50% on the Spanish coasts on average. As many would-be buyers who actually booked flights from the UK or elsewhere to fly over to Spain (when that was still possible!) on the hope of finding a dream villa for a 50% discount can attest that this simply is not the case. There has been a lot of hype going on property falling by 50% but frankly this contradicts any empirical observation.

There has been a significant market correction, no doubt, but not to the extent of a 50% fall on the costas. It’s true that some isolated off-plan developments perched atop hills which are a good 10 minute drive from civilization have fallen 50% or maybe even more, but these are few and do not constitute a general rule.

I would say, being coherent with the articles I write, that property prices will still keep on falling across the board over the next years, however steadily. I find the report’s conclusions a tad overoptimistic to be honest. For example, it remains to be seen how the huge property portfolio in the hands of struggling Spanish savings banks (http://ftalphaville NULL.ft NULL.com/blog/2010/04/14/202681/the-slow-death-of-the-cajas/)will unfold in the near future affecting price fixation when –and if– they are released openly into the market.

This could seriously add pressure driving down prices further adding to the oversupply. Lenders are going to great lengths not to release en masse their ever-growing property portfolios as a result of repossessions (http://www NULL.marbella-lawyers NULL.com/articles/showArticle/home-repossessions-in-spain-defaulting-on-mortgage) or “daciones en pago de deuda (http://www NULL.marbella-lawyers NULL.com/articles/showArticle/spanish-mortgage-dacion-en-pago-handing-keys-bank)“. Fortunately the Government is always there to help them (if not bail them out) amending accounting rules where necessary so balance sheets aren’t hurt.

It’s reassuring that those in need are helped out when needed.

Nevertheless I’d say there are already available interesting bargains (since 2009 actually) mainly from the classic three D’s (divorce, disease, death) and non-performing mortgage loans. But we have not yet reached that stage of capitulation in the property market which this report seemingly implies. I’m sure we will get there at some point or other.

In any case the spring season traditionally brings a surge of conveyance procedures and we are now witnessing a renewed interest in Spanish property over the last month. That is, providing volcanic activity keeps a low profile! Fingers crossed.

Source: Cotizalia (http://www NULL.cotizalia NULL.com/en-exclusiva/santander-pisos-inmobiliaria-caida-20100421 NULL.html)

Property

  1. April 21st, 2010 at 17:11 | #1

    I have not seen the report but I would have thought that rather than Santander releasing the generalised statement about an average drop of 50% in property prices would have been better to drill down into which level of the property market this actually affected. Whether it was the low end of the property market including first time buyer houses or whether it was the top end. I would predict that it mainly affected the holiday / apartments which were taken up by property investors and the main reason this has been an issue is a lot of them haven’t been finished or are built in development areas where building has ceased during this time.

  2. raymundo
    April 21st, 2010 at 17:55 | #2

    Hi Clare,

    I couldn’t agree more with you.

    I have always been of the opinion that top end properties, because of their own nature, would hold better than your average 2 bedroom property of which there is a glut available in the market. There are articles written on this:

    http://www.elpais.com/articulo/paginas/lujo/aguanta/inmune/elpepueco/20080516elppropag_1/Tes (http://www NULL.elpais NULL.com/articulo/paginas/lujo/aguanta/inmune/elpepueco/20080516elppropag_1/Tes)

    (SEOPAN’s article may be somewhat biassed as they represent developers)

    http://www.seopan.es/ficheros/e4b9f602248602885cbee808c6c02c71.pdf (http://www NULL.seopan NULL.es/ficheros/e4b9f602248602885cbee808c6c02c71 NULL.pdf)

    Granted, even top end of the range properties have fallen in price but in my opinion certainly not to the same extent as the medium and lower range of the market. As the old adagio goes: location, location, location:

    http://www.diariosur.es/20091125/malaga/crisis-traga-mercado-vivienda-20091125.html (http://www NULL.diariosur NULL.es/20091125/malaga/crisis-traga-mercado-vivienda-20091125 NULL.html)

    Higher end may be less resilient but has proved itself not to be immune to the credit crunch after all.

    Spanish lenders expect the price of land to fall as a whole by 60% when we finally do bottom out:

    http://www.cotizalia.com/en-exclusiva/banca-caida-precio-suelo-bankinter-20100125.html (http://www NULL.cotizalia NULL.com/en-exclusiva/banca-caida-precio-suelo-bankinter-20100125 NULL.html)

    Ironically here is Bank Santander in 2008 denying there would be a fall in house prices in Spain as significant as that in the US. It’s so easy to make predictions in hindsight:

    http://www.cotizalia.com/cache/2008/11/25/noticias_18_banco_santander_descarta_precio_vivienda.html (http://www NULL.cotizalia NULL.com/cache/2008/11/25/noticias_18_banco_santander_descarta_precio_vivienda NULL.html)

    In any case it’s now in the best interests of lenders to make public statements, such as this one, declaring we’ve already seen the worst to unload their property porfolios to FTB and others interested giving them the final pat on the shoulder to move in for the kill:

    Pssst! Looking For Cheap Spanish Property? -5th October 2009

    Maybe or maybe not.

    Regards,

  3. Martin
    October 15th, 2011 at 19:14 | #3

    The market is stillfalling in Spain now and the sovereign debt issues mean this pattern is likely to go on for some time yet. I read a very interesting analysis of the situation here: http://crownpropertyinvestments.com/news/32/140/Is-it-time-to-buy-in-Spain-again—The-follow-up/ (http://crownpropertyinvestments NULL.com/news/32/140/Is-it-time-to-buy-in-Spain-again---The-follow-up/)