Sunday, November 1, 2009

Property prices in Spain will remain stalled during the next two years

The Spanish government is calling the bottom of the market but will remain stalled during the next two years and time for buyers to return, according to reports.

Prieto, a partner for property advisor Knight Frank told in an interview, "If you put a home on the market at a 35 percent discount to highs from three years ago, and partially-financed, prices are going to stay at these levels until 2011," according to Reuters reports. He said that for sales to go ahead, properties need to be located in prime areas within cities' metropolitan circles. Properties on the coast or away from cities are going to be stalled for years.

He commented: "If you're trying to sell somewhere like Valdeluz or Sesena, 100 kilometres outside of Madrid, forget it. Properties on the coast or with these kinds of setbacks are going to be stalled for years."

According to reports, the official data states that Spanish property prices have only fallen 6% or so from their (inflation-adjusted) peak, but the actual fall to be between 20-25%. The portal said that this will vary by area and property. The Spanish housing market is going through its worst crisis after an unexpected end to a construction boom that coincided with tightening credit markets, triggering price drops for both residential and commercial real estate However, Knight Frank said commercial real estate has experienced a slight recovery thanks to investors looking to make money on rental assets.

In a new report just released, 'For a Housing Market that Works: A Proposal for Structural Reform', a group of economists at Fadea, including Pol Antràs of Harvard University, Luis Garicano of the LSE, and Javier Díaz-Giménez of IESE Business School, explained how to fix Spain's housing market and help the economy recover, the report recommends 4 urgent policy steps to encourage renting over buying, and address other structural problems in the housing market. They suggested to Liberalize rental contracts and give landlords better legal protection, Remove all fiscal incentives that encourage buying over renting, Stop selling social housing and offer it for rent instead and Reduce or do away with taxes on property sales such as VAT and transfer tax.