Spanish homes prices puzzle

House prices in Spain are going UP and DOWN at the same time, which is a puzzle to experts and the buying/selling public at large.

On an annual basis, Spanish house prices fell for the first time in over a decade during the second quarter of 2008 and data pointed to sharper declines once new homes begin to lose value, according to the National Statistics Institute (INE) in its first housing report. Amazingly, the report also found that new homes gained in value over the last quarter.

The decline, compared to a 2.8 percent increase in first quarter prices, was driven by a big fall in the value of existing homes between April and June, the INE reported. Overall, house prices have fallen 0.7 percent in the first six months of 2008, according to the INE survey. However, separate Housing Ministry data shows only 0.3 percent fall in second quarter prices - the first they have recorded since the early 1990s.

Analysts agree the INE index is more realistic than Housing Ministry data, which showed prices rose 2 percent year-on-year in the second quarter. Resale properties are leading the lower prices, down 4.9%. We are all surprised the INE reported new homes gained in value 5.3% in some areas between April and June.

House prices in Spain have fallen by an average three points according to the latest data which comes in the new IPV index which is an index of housing prices in Spain. It shows a fall of 3.1% from the first to second quarter, and for the year so far of 0.7%.

So resale Spanish house prices are declining by 4.9% while new house prices are increasing by 5.3% and there is an overall decline of 0.7%? Compared with the UK housing market the latest Spanish statistics should not generate much cause for concern so far.

In reality, the highest ever Euribor rate of 5.5% is causing an increase in Spanish bank repossessions and as the loan to value ratios tend to be modest by UK standards, the asking prices needed to recover the outstanding loans are very low. Specialists, www.PropertyInSpain.net have bank-owned bargains at 25% to 50% below current valuations and even with legal costs added are good investments for savvy buyers.

Because of the relatively low numbers of Must Sell property, the impact on the national statistics, is minimal, but can be expected to rise as the high interest rates – still lower than those in the UK - affects hard-pressed owners.

Spain looks like being a buyers’ market for some time to come - make hay while the sun shines, as they say…