The government body behind Spain’s so called ‘bad bank’, which was set up to remove negative assets from struggling financial institutions, have forecast that Spanish property prices will not begin to rise again until 2017. FROB (The Fund for the Orderly Bank Restructuring) estimate that house prices will fall for the next two years, then stagnate for two years, before starting to increase at an annual rate of 3% in 2017.
Specifically, the organisation believes that prices will fall by 2.8% in 2013 and 1.5% in 2014 before beginning to rise. They also predict that land prices will follow a similar trajectory, falling by 12.5% in 2013 and 5% in 2014, land then beginning to recover in 2016, but at a lower level than that seen by property, just 2.5% a year.
Recently, the “bad bank” announced that it is considering demolishing new build properties that are lying empty and which have no viable market. However, there will be no demolitions until 2016. Large swathes of the Spanish coast have fallen victim to over development and are now struggling to generate sufficient interest from investors.
Article from ‘A Place in the Sun’ website.
By putting forward these predictions, they make sure that any current optimism is dampened. And how do they know? What reliability can be placed in the same people who didn’t do anything to predict the slump in the first place? There are so many markets that such predictions are worse than useless. There are those in the prime Costas that have possibly bottomed and may even see a slight rise as demand comes in for ‘the best’ so the comment about the ‘Spanish coasts’ is misleading as it’s the properties inland catering for the Spanish market that have no economic rational. See my previous blogs and comments. Also re the need for demolition. The ‘dross’ that can never sell must be removed to bring the statistics to a realistic level. Having so many completely useless structures counted as a property ‘overhang’ merely distorts the stats to the disadvantage of Spain in the opinion of international markets that work on statistics alone.
Confirming the above, in the same ‘A Place in the Sun’ webpage, there is reference to this article. –
Despite economic uncertainty property sales are rising on the Costa del Sol, with one local agent reporting a 74 per cent increase in sales so far this year. Taylor Wimpey España believes that the fall of the euro, the government’s new residency scheme for those spending over €160,000 on property, and the reduction of VAT to 4 per cent until the end of 2012, have all increased consumer confidence in Spanish property, with investors and those looking to buy a second home gradually returning to the market. Marc Pritchard, Marketing and Sales Manager for the company, comments: “Whilst the domestic market in Spain is indeed suffering, the second home market is back with vengeance. Overall we have seen a 17 per cent increase in sales to date in 2012 compared to the same time last year, but the 74 per cent increase in sales in the Costa del Sol is remarkable. “Taylor Wimpey España has been active in the Costa del Sol for 50 years now; we have experienced the boom days as well as the bubble bursting but we remain strong in our belief in the area as the perfect place to own a second home so much so in fact that we have just invested €15 million into our latest development, Los Arqueros Beach in Marbella.”
So, don’t listen to Spanish official statistics. Talk to and be advised by those in daily contact with the market.