Spanish Property Market Expected to Fall a Further 27%

The Spanish property market has not yet reached bottom and could drop a further 27% during the coming 12 months, according to a new report.

In total the number of property transactions in 2009 fell by approx 41% compared with 2008, the report conducted by Spanish property consultants and analysts Aguirre Newman found.

The report – Titled “Coyuntura Global del Mercado Inmobiliario Español”, also found that in many cases bank valuations overestimate the true value of property in Spain.

The report goes on to state how there is no real solution to the problem other than a total re-working of the Country’s banking regulations to ensure that all property valuations in future reflect a much more realistic value.

It also issues a stark warning that the housing market in Spain will remain depressed while banks continue to sell off huge stocks of repossessed homes and regional authorities continue to finance the purchase of unsold homes with government grants, such as Andalucia’s 2010 plan.

There are currently 610,000 new homes recorded as being unsold in Spain, with another 380,000 still being “under construction” and 520,000 second hand homes for sale – a total of 1’510’000 Unsold Properties!

Whilst the report looks unfavorably on the residential property market, it does expect office and retail rental prices to stabilise in 2010, ahead of any possible recovery in 2011.

The housing slump lead the Spanish economy into the worst recession in 60 years, and the country’s unemployment rate is currently the highest in the EU. Residential property transactions fell by approx 30% over the past year according to the latest government statistics.

Construction companies and developers such as the Martinsa-Fadesa Group have filed for protection from creditors in the past 18 months after falling behind on debt repayments when the market collapsed.

Banco Santander, Spain’s biggest bank, together with its consumer unit Banco Espanol de Credito SA, has acquired an estimated €4.1 billion of property assets from collapsed developers and This has resulted in many analysts warning that if these properties are released into the market in the coming year it will have a major impact on the industry.

The BBVA Bank has also reported how it expects to end 2009 in possession of over €1 billion of real estate after accepting property assets in exchange for cancelling loans.