Pseudo-experts and Spanish property

At the beginning of August I saw an article in Money Week discussing the Spanish property market. Now for those of you that might not be familiar with the site, it looks primarily at investments; property, stocks, etc… Anyway, this respectable site wrote about the Spanish property market, which if you follow my blog, as an estate agent on the Costa del Sol could only be of interest to me.

It could not be further from the truth, unfortunately. The content of the article is not incorrect, but it appears that the person who has written the article has not looked at the information in the right context. Which when it comes to statistical information in Spain is a must.

I have highlighted a few points that I thought should be clarified and/or corrected below

“Right now there’s clearly some ‘statistical noise’ in the housing market. After a sharp fall, prices stabilise for a while, which can give the impression there’s a pick up underway. But anyone feeling like buying a house right now should take a look at what’s happening in Spain…Why? On the surface, the Spanish property scene doesn’t look too bad. Ministry of Housing figures show just an 8.5% drop over the last 12 months from the mid-2008 peak.”

2 points worth noting on these figures. First, unfortunately the Ministry of Housing statistics have been repeatedly called into question by the Spanish press for its less than reliable figures, as there is a lot of anecdotal information showing a drop higher that 8.5%.

But again this is down to interpretation. The statistics are based on actual completed property transactions. So first you have to take into account the percentage of ‘off-plan’ sales that have been going to completion this year. These properties having been bought (stage payments, etc…) during the ‘boom’ years would have been at higher prices than might be available now. So this is one way how the existing figures have been distorted.

Further more, in many areas of Spain, there has been a ‘tradition’ of under-declaring the sales price to pay less taxes to the Spanish government. But thankfully the Spanish government has been cracking down on this practice over the last few years. But from a statistical point of view it further distorts the figures. For example, you buy a property in 2007 for 200,000€ but at notary it is declared you are buying for 170,000€, with the remainder 30,000€ paid under the table. Now in 2009 you sell for 20% less than you officially bought for. So officially you sell now for 160,000€. When you property is added to the statistics, you have only dropped 5.9%. But the reality is a different matter.

“The independent house price index compiler TINSA reckons average prices are 13% off the top and down 18% on the coast. But the word from developers and estate agents is of falls of up to 30%.”

Yes this is also correct. Except this is the drop of 18% is since 2007 not 2008 as would be assumed from how the article is written. With a drop of 6.2% from 2007 to 2008 and 10.9% from 2008 to 2009 for July year on year.
Now it is worth noting TINSA valuations are generally well regarded, and are even seen by some as pessimistic. In most cases included my own, I expected the valuation to be higher than the agreed upon sales price as I was requesting a mortgage from my bank. But this was not the case for many. And little thought was given to TINSA’s evaluations. Furthermore in the past many other evaluation companies were considered more ‘optimistic’ in their valuations. Case in point at its highest point the value per square metre in 2007 was 2542€. In most cases the price per square metre was selling for closer to 3000€. Of course this is not a general rule, but then the average price for the whole Mediterranean is never going to give a clear figure.

There are other points made in the article that I could pull to pieces, statements not backed up by sources or statements taken out of context. But I think have covered the most salient points for anyone looking or researching property in Spain

For those that want to see the original article: Money Week

Regards
Andrew Belles

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3 Responses to “Pseudo-experts and Spanish property”

  1. Dentist Garland says:

    Very shocking percentage of drop. I hope it would go up, now that the economy is getting better.

  2. wolfgangbrand says:

    Yes pretty drastic, but I think it hasn’t touched ground yet. I think, to understand what is really going on you see when working in an estate agency on the Coast.

    Foreign Newspapers never paint the right picture.

    Wolfgang Brand

  3. Polaris World says:

    There is a lot of noise out there with statistics but the most reliable are probably TINSA. There are 30% discounts due to developers and distressed vendors needing to sell quickly but it does not give the full picture. Six months ago at La Torre resort in Murcia you could buy for €100,000. Now it’s at least €115,000. At Condado de Alhama it was €83,000, now €90,000. Does it mean prices have risen?Probably not but it could be a sign the market has turned and the most distressed sales are clearing.

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