Spanish Property for Sale

The Future Of Spanish House Prices | A Life In Spain: Blog & Forum ...

Still heading in the wrong direction , the property market in Spain will, in theory, be a good market to invest in with many foreclosed and distressed property sales across parts of Spain, although at the moment there seem to be few signs of the dramatic reductions that are forecast (up to 50% by 2011), or indeed are desirable if a sustainable market recovery is to happen.

The Theory

With anywhere up to 2 million unsold properties on the market in Spain, and an optimistic forecast of around 250,000 house sales per annum, it is going to take some time for demand to outstrip supply and drive prices up, and in the short term prices should be falling dramatically.

The Reality

While prices are low, they are not as low as many have expected, or potential investors require. A proven ratio in the past has been that of property prices against disposable income, which at the height of the property price glut was over 7 years, compared to a historical average of 4 years. What is it at the moment? A confusing 6.5, which while lower than the peak is still along way off what the market would expect, and indeed needs if it is to get kick started anytime soon.

Rental yields have also been a good indicator, with the higher yield indicating good value. In many ways this is a highly relevant ratio if the market is to be kick started with investment income, as the lower the price (which will attract the property investors) the better the yield, but with the market dominated by second and holiday properties the excess supply of potential rental properties in Spain is in fact forcing the yields down.

So will prices fall?

It is hard to see that a combination of the increasing interest rates and ongoing financial meltdown in Spain wont eventually cause the somewhat unnatural state of affairs to break, and the fact is that the country needs it for it’s long term recovery, however hard that may seem.

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