The region that has shown the greatest drop in prices of new properties for sale has been La Rioja (2.9%), followed by Aragón (2.7%), Extremadura (2.4%) and Asturias (2.2%). On the other hand, the communities of lowest price decrease have been Navarra (0.9%), Castilla y León (1.2%), Ontario (1.3%) and the Canary Islands (1.4%), according to this study which is based on a direct survey on probe housing of more than 45,700 properties of different types corresponding to 3,100 different property developments.

Evolution of the housing sector

In the first semester of 2014, the absorption of the stock of new properties for sale has been generated primarily by venture capital funds mostly of foreigners, who have acquired large housing kits at reduced prices. According to this report, the production activity of new property was reduced to less than 5% of the registered at the moment of highest production, being difficult to find recently initiated developments. The market is therefore basically confined to the marketing of properties for sale which are already built or under construction, even though the resumption of paused construction of property is meaningful.

In turn, the data of INE/SSO (Spanish Statistical Office) indicate that the volume of housing that was initiated and completed during the first semester of 2014 is around 95% in the first case and 80% in the second, regarding the same period of 2013. This data reflects the persistent slow execution of the construction work, which, however, improved compared to the same data from a year ago (60% and 50% respectively in 2013 compared to 2012).

“The demand continues with a higher level of contraction, which can not be attenuated by the continuing price reduction (40% in real terms from maximum),” confirms the Spanish Property Valuation Society that assures on the other hand that “this semester, the price variation in provincial capitals (1.8% in total) has reduced by 3% regarding the second semester of 2013 and by 5% regarding the first semester of that same year.”

In turn, the offer volume of new housing by the properties of banks apparently remains stable. Nevertheless, “the prices are still considerably lower than those proposed by promoters, who submit in some cases specific offers for only very short periods and at very low prices.”

The Forecasts

Despite the contraction in recent years, the interest in the housing market stays the same. Nevertheless, the Spanish Property Valuation Society assures, “the difficulty in obtaining financing is still a considerable handicap when realizing operations.” Moreover, other aspects that affect this evolution are the reduction of offered prices by the promoters, linked to its borrowing power; the economic stability according to the GDP growth and the decrease in unemployment, and the true disposable income of the families for the property purchase that continues with the downward trend that began three years ago.

Conclusions of the study

For the Spanish Property Valuation Society, the downward trend in the level of production of new housing developments, “will continue for another year, although at a slower pace,” as seen in the yearly variation of housing projects endorsed by Professional Associations.

The reactivation possibility depends on the same factors as years ago, such as the absorption rate of the current stock, which seems to have improved, mostly due to the acquisitions of large investment groups; the contraction of the particular demand that does not find buying incentives, the high unemployment rates that generate uncertainty in the population and the tough conditions to obtain mortgage.

Despite the fact that one can start to see positive signs in the economy, the Spanish Property Valuation Society recommends “to maintain a wise attitude towards the possible reactivation of the real estate sector in the short term, with regard to relatively recent experiences of a probable turning point that did not consolidate”.

On the other hand, rent ensures that, “it continues to gain ground as an alternative to place part of the finished promotions that have not sold all their units.”