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The Use of Statistics to Analyse the Spanish Property Market

- Updated: 04/02/2013
The Use of Statistics to Analyse the Spanish Property Market

Benjamin Disraeli famously commented “Lies, damned lies and statistics” when an opponent tried to baffle him with meaningless figures. The use of statistics to make an argument or disprove a theory is as old as time itself, but caution should be taken when applying them to something as fluid and multi-faceted as the Spanish property market.

Tumbit asked Campbell D. Ferguson, FRICS, of Survey Spain SL his thoughts on the use of Statistical data when used to analyse the property market in Spain :

A recent report by Kyero entitled – “Spain will lead decline in house prices in Europe commented :

“According to a recent report by Standard & Poor’s, the Spanish housing market will lead the falling prices in Europe this year. They estimate that prices will drop by 7.8% in 2013, partly due to the creation of the bad bank (SAREB), and that the cumulative decline over the next four years will be around 20%.

The report shows that the European recession is still lowering housing prices in most markets, and that the other two European countries which will lead the declines this year will be the Netherlands (5.9%) and France (5%).

The rating agency notes that the adjustment of house prices in Spain has already reached 26% since their peak in March 2008 which, with a further anticipated drop of 20%, will bring the total decline to 46%, placing prices at almost half the levels they were before the onset of the crisis. The report estimates, according to International Monetary Fund data, that there is still a stock of between 700,000 and one million unsold homes, and that the prices will fall by 6% in 2014.

One of the reasons for the fall in prices in 2013 will be due to the launch of the SAREB after the bank bailout. El Pais reported that the agency stated: “The recent injection of liquidity in the Spanish banking system is likely to accelerate the cleanup of the balance sheets of financial institutions and the disposal of real estate assets in the portfolio”, which “will contribute to a further drop in prices this year”. They pointed out, however, that the rapid increase in unemployment, along with the severe fiscal adjustment and tight financing conditions “are also fuelling the residential market decline.”

Survey Spain’s response :

”Anyone involved with property in Spain knows that the government statistics are inaccurate, principally due to the effects of money laundering regulations cancelling out the real fall in property prices. For the IMF and others to base their comments on these statistics shows naiveté and lack of knowledge of the market. There has already been a fall of 40 to 60% in most areas. Agents are finding that there is now a dual market, with the best property experiencing competition and thus buyers’ negotiation power is less and prices are largely stabilised; whilst secondary and other property, by location and quality, seeing little interest and thus the prices are dropping further.

Additionally, the banks are having a major effect upon the secondary market. The best property repossessions are taken up by bankers and their friends and thus do not really reach the market. The poor properties are offered with mortgages of up to 110% to cover transfer costs. The individual buyer then suffers from an immediate negative value on their mortgage as the asking price originally has probably been higher than the market; they are unable to offer similar finance to any purchaser and therefore have to drop their price significantly just to be equal; and they have the selling costs that can amount to 11% of the price. Thus they can be instantly in unsupported debt of up to 30 or 40% of the loan. It is immoral for banks to be acting in this way.

As for the price falls being worse in the tourist areas, that is not correct as there is an increasing interest from Nordic and Russian buyers, plus no diminution of buyers from the traditional British, Dutch, French, German, etc sources. It’s the Inland Spanish property that is seeing a continuing lessening of values as they are entirely dependent upon the Spanish economy and that continues to reduce.

Reporters and commentators should be more responsible in their articles in getting the facts correct.