END OF THE SPANISH PROPERTY BOOM

Not since 1997 have property rates risen by less than 5% in Spain. Today, official figures released by the Ministerio de Vivienda (Spain’s department of housing) show a modest overall property valuation of 4.8% in 2007 – confirming the end of the country’s powerful, decade-long real estate boom.

Taken at face value, this small price increase over 2007 can be misleading because it indicates that prices are still rising, albeit at their slowest rate in ten years. A closer look at the data, however, shows that property rates actually fell in 11 of Spain’s provinces – a development made more disturbing by the fact that this price drop took place entirely within the last quarter of 2007.
Another figure that speaks of the state of Spain’s property market is the decrease of 5.2% in the number of construction projects initiated during 2007. On a similar note, the number of real estate transactions conducted in the second quarter of 2007 fell by 16%, as compared to the same period in 2006.

It was only thanks to the influence of Spain’s coastal and extra-peninsular regions that the national average didn’t take a downward turn instead of merely slowing its growth. Today’s picture is certainly different than the Spanish property market only four years ago, when prices saw yearly rises of over 18%.

Rafael Pacheco spoke on behalf of the Ministerio de Vivienda to confirm that these figures are in fact in line with the Spanish government’s plan to moderate property prices without deterring the country’s economic growth, in order to facilitate consumer access to housing.
According to Pacheco, the figures constitute a “gradual adjustment process, for which we were prepared.”

A look at the figures
The official figures released on January 18th show how prices fell in 11 provinces of Spain in the last 3 months of 2007. The most significant price drop, at 5.1%, occurred in Zamora.

The rest of the quarterly price drops didn’t exceed 2.5%; in Ciudad Real prices fell by 2.2% while Córdoba experienced a decrease of 2.1%.

In Álava, Albacete and Cantabria prices fell by 1.9%, while Soria and Burgos experienced price drops of 1.5% and 1.1%, respectively. Below the 1% mark were Castellón, Segovia and Guipúzcoa with respective decreases of 0.9%, 0.8% and 0.4%.

It’s worth noting, however, that none of these regions are popular destinations for overseas property, and that the coastal regions preferred by foreign homebuyers all fared relatively well.

Where things are looking up
The bright spots of the Spanish housing department’s report were the 12 regions where prices topped off above the 4.2% rise in the consumer price index. Murcia stands out as the strongest local property market with an increase of 8.1%.

The remaining regions with significant increases: Ceuta and Melilla (7.9%), Asturias, (7.7%), the Balearic Islands and Galicia (6.9%), Cataluña and the Canary Islands (5.8%), Extremadura (5.2%), the Basque Country (5.1%) and Andalusia (4.8%).