Spanish house prices must fall further before recovery seen

 

Spain's Minister for Public works announced yesterday how the glut of new properties for sale amounted to 687,523 last year, down just 0.08% on 2009. Including resale properties, the total number of properties for sale came to 1.1 million.

The excess of unsold new homes compiled over the boom years meant that Spain was building more houses every year than France, Britain and German together - is one the main reasons for the collapse in the property market since 2008. Spain also has Europe's highest jobless rate at over 21%, due in part to the economy's past heavy reliance on the construction industry. The high level of unemployment also means that few families are awarded new mortgages, which in turn means that the property stockpile remains stagnant. The ministry reported how the stock of unsold newly built homes fell last year by just 521 units - despite a hike in the rate of IVA introduced in July 2010 and the removal of tax relief on mortgages for the family home for all but low income groups at the start of 2011.

Sales of New homes increased 1.4% in 2010 to 221,839 units, while the number of New builds being constructed in 2010 came to 218,572 units.

House prices have shrunk by 16% since the end of 2007 and by 20% when taking into account the impact of inflation. The Bank of Spain estimates that prices need to drop by 30% (Based on 2007 prices) before the market can start to recover - something that industry experts say is unlikely to happen for a further 18 months at least.