Tuesday 21 August 2007

Update on the Spanish Property Market

The most recent statistics available paint a picture of a soft landing in progress, in which property price rises are converging slowly on the general inflation rate. However, there remains strong evidence which suggests that the market is much weaker than the figures suggest, but only in certain areas, and for some types of property.
Meanwhile, mortgage interest rates are still rising, and planning approvals, at around 200,000 per quarter this year, are still far too high. This is likely to put further pressure on the market, and increase the risk of more serious problems in the next 1 or 2 years.
On the other hand, the Spanish economy is still growing strongly, with unemployment falling, and against this background it is unlikely that the Spanish property market will crash.
Despite the high level of construction activity in Spain, the supply of quality property is scarce, especially in popular coastal areas. A combination of poor urban planning and unimaginative developers churning out identikit apartments has blighted vast swathes of the Spanish coast, which now looks like a wall of cement in many areas.
Price differentials between the pockets of quality and the rest are likely to increase, with quality property rising in value, whilst the rest of the market stagnates at best. Under the circumstances, the present buyer’s market might be a good time to find quality property for a reasonable price. Having said that, buyers need to be aware that there are still many overprice properties on the market, so detailed local research is key to identifying value.

Tinsa €/m2