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Spanish property prices expected to rise

Thu 7th Jan 2010

Property prices are starting to rise in some parts of Spain, according to a new report from one of the country's largest savings banks.

The hoped-for real estate recovery is underway in locations where there is no glut of property such as Cantabria, the Basque region, Asturias and La Rioja, says the report from Caixa Catalunya. ‘House and land prices have touched bottom in some cases. The adjustment is almost over, if not already,' said Eduard Mendiluce, head of Procam – The Bank's property division.

But there is no good news for those wanting to sell in more popular locations such as southern costas where there are many properties that are simply not selling.

The report also notes that there are between 660,000 and 1,040,000 homes currently on the market in Spain. This represents between 2.6% and 4.1% of the country's market. The excess is expected to decrease to between 640,000 and 1,070,000 during 2010, down to between 2.5% to 4.2% of housing stock.

The report estimates that there will be a demand of 220,000 homes per year between now and 2015, almost half the level of 300,000 to 450,000 estimated by developers, this means that it could take up to five years for the market to digest this excess.

However, things are looking up for the luxury property market - Barbara Wood of The Property Finders, says that transactions in certain areas around Marbella were increasing as early as the first quarter of 2009. ‘Secondary areas lagged behind with the first green shoots only appearing about nine months later and the worst locations are still in total paralysis in 2010'

'At the moment the typical person looking for property is a cash buyer, buying for their own use, with a medium to long-term perspective, not dependant on rental income and only interested in buying in prime locations' she explained. ‘And those that do require a mortgage need a maximum of 50% relative to value. In other words, the right purchasing parameters are in place again. Spain's property market managed very well without a mass market before the boom of the Noughties and will do so again, returning I hope to the stability and long-term growth that held for four decades but this time going for quality rather than quantity,' she added.

She also points out the irrelevance of official statistics. ‘The official Ministry of Housing figures, based on registered transaction prices and supposedly objective, are distorted by under declarations of the sale price in the past and only once we have had several years of full price declaration will this distortion be washed out of the system, while the oft-quoted TINSA stats are based on subjective market appraisals. Either way, they are unreliable and, therefore, are meaningless,' she explained. ‘There is only one way to get good information about what prices are doing in 2010 and that is to talk to someone who is actively involved in putting deals together right now. When I'm asked about price falls, if they have hit bottom or if they have further to go my reply is that it all depends and there is no one answer but it seems to me that there are two main factors influencing outcomes: location and how badly the seller wants to sell. I would say there is a shortage of top quality properties in the best locations at the right price level for 2010,' added Wood.

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