Please scroll towards the end of the page for figures related to Spanish property prices in the last decade. Immediately following is an analysis of the different methods of measuring fluctuations in property prices and the limitations of each.
The difficulty in measuring Spanish property prices stems from the flawed methods and incoherent data used by the various sources that compile and publish yearly statistics on the subject.
Three methods stand out for assessing the national tendencies in Spanish property prices: (1) using numbers provided by the Spanish Ministry of Housing (MiV); (2) compiling data from the Land Registry Office of the declared value of Spanish homes upon transaction; and (3) judging values by the asking price of Spanish homes listed for sale on property websites such as Idealista.com and Kyero.com.
Each method has its flaws and it is difficult to ascertain which has a better grasp on the evolving reality of property prices in Spain. Following is a brief description of these methods and their attendant limitations:
Using figures from the Spanish Ministry of Housing (MiV)
The official price index published quarterly by the MiV is based on figures provided by the Association of Official Appraisal Agencies in Spain (ATASA). This organization is made up of certified appraisal agencies in charge of assessing the value of properties throughout Spain and compiles data from the appraisals realized by their members.
The first problem with using home appraisals as a means of judging the value of Spanish property is the fact that not all homes in Spain are appraised during the buying process. Property appraisals are only performed when the buyer requests a bank loan as an aid in the purchase of a home. Although most home purchases do involve some kind of loan, the cases to the contrary constitute a gap in this appraisal-based method of assessing property values.
A more serious and intrinsic flaw to this method involves the influence private banks exert over the actual home appraisal process. Banks and other financial institutions owns a large percentage of the agencies that provide information to ATASA, which in turn produces the figures used officially by the MiV to determine national property prices.
This direct relationship between private banks and the appraisal agencies results in serious bias. When market conditions are favorable and banks wish to lend out more money, appraisal agencies are pressured to overvalue homes. In times of financial crisis banks lend out as little of their money as possible and exert their influence to ensure undervalued property appraisals.
Using figures from the Spanish land register
The declared value of Spanish homes bought and sold on the market is openly available at the Spanish Title Deed Registry Office. In years past, this information was used as the official method of measurement for property prices in Spain.
This method, however, is seriously flawed and has been widely discredited as an official means of measurement due to the unreliability of the register’s figures. Understating the value of a home (by an estimated average of 30%) in order to avoid high property transfer taxes is common practice in Spain. Thus, the declared value of a home upon transaction is not a reliable indicator of the true value of Spanish property.
Using figures from online property portals
Unofficial price indexes are provided by other Spanish property portals such as Idealista.com and Kyero.com based on the asking price of homes listed for sale in their property databases. There are three important drawbacks to this method of assessing property prices.
Firstly, there is a discrepancy in the asking price of homes listed for sale online caused by the fact that private sellers and estate agencies alike make joint use of these online services. This means that properties listed for sale online can either represent the original asking price of a home listed by a private seller or the commission-added price listed by an estate agent (the agent’s commission itself can vary between 1 to 10 percent of the original asking price). Instead of taking these price discrepancies into account, all of the asking prices listed online during a given period of time are carelessly grouped together, providing misleading information.
Secondly, using online asking prices to judge Spanish property values ignores any bargaining done during the sale of a home. Price bargaining is an integral aspect of property negotiations in Spain, with eventual sale prices varying by up to 20% of the original asking price. The data reflected by online property portals fails to take price bargaining into consideration as well as whether properties are actually sold at the price originally listed.
Finally, asking prices for homes listed online are often unrepresentative of actual market values because of the arbitrary nature of price setting in the selling of a Spanish home. Spanish legislation allows sellers to list their properties with multiple estate agencies.
This lack of exclusivity on the part of estate agencies allows for little influence in the setting of a price, and many sellers set unrealistically high prices by ignoring or bypassing professional consultation. Although many of these overpriced properties simply linger in the market unsold, they continue to influence the statistics provided by online property portals.
Conclusion
Although no method is perfect, we consider the approach used by the Spanish Ministry of Housing (MiV) to be the most reliable indicator of price fluctuations in Spanish property. Please find below a detailed account of both historical and recent figures provided by the MiV.
Spanish property prices experienced a gradual deceleration throughout 2007, rising nationwide by a modest 4.8%. This increase represents the lowest since 1997; the year that marked the beginning of Spain’s decade-long property boom with yearly price increases of up to 20%.
NOTE! For in-depth table of 2007 property prices see 2007 Spanish property prices provided by the Spanish Ministry of Housing (MiV) or click here for Spanish property prices back to 1995.
Investment from foreign buyers relocating, retiring or vacationing in Spain played a crucial role in 2007 property values, as the highest price increases throughout the country occurred in popular overseas property destinations. The highest regional price increase (at 8.1%) took place in Murcia; one of the country’s current hotspots for foreign homebuyers.
Prices actually fell in 11 provinces throughout Spain, with the strongest price drop occurring in Zamora at 5.1%. This again highlights the positive influence of foreign homebuyers, since all of the price drops occurred in areas not targeted by this market.
The MiV predicts greater stability now that prices have settled to more sustainable levels, as well as long-term appreciation of Spanish property values. The stabilization of property prices has had the effect of driving out speculative investors out for quick and lucrative returns and increasing accessibility for private consumers, who are no longer in competition amongst themselves now that demand no longer overshadows supply.
Summing up, 2007 marked the conclusion of Spain’s 10-year property boom. Prices settled to regular European levels and the market attained a long-absent equilibrium with regard to supply and demand. Spanish property continues to show long-term promise thanks in large part to the avoidance of a post-boom crash and Spain’s enduring popularity in the overseas property market.
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