The Spanish Property Crisis - How long will it last?

Published on 30/03/2009 in Your Spanish Home

Construction SpainOf course, the vital question for any property owner trying to sell his home is: how long will the Spanish property crisis last?  The answer is fundamental to any attempt to sell.  It will define any sale price and perhaps whether or not it is actually worth even trying to sell at the moment.

Of course, the future is impossible to predict with any absolute certainty - unless you have clairvoyant capabilities.  Nonetheless, making some kind of prediction is essential.  The alternative is to ‘bumble’ along pretending that no problem exists or, that if one does, it will go away soon – a classic case of ‘burying your head in the sand’.  Whilst this is a comforting way to deal with a problem it is hardly the way to solve it and no way to tackle the potential difficulty of selling your property.

So, how can you possibly consider predicting the length of the property crisis?  Well, as good a way as any is by looking at the facts and then assessing what happened in the past.

Presently, there is little on the Spanish property front (as a seller) that is positive.  Tinsa (a major Spanish appraisal company) have just stated that property prices are likely to drop a further 20% during 2009.  This is quite probable given that in 2009 there are likely to be some 1.5 million new builds for sale and (no-one quite knows) possibly a million resale properties.

To make matters worse, Sterling has dropped like a stone over the past year and has made living in Spain expensive for UK pensioners and those receiving their income from Briton.  This has led to an epidemic of sales on high density British coastal estates in Spain thus creating a downward vortex for property prices there.

Meanwhile, the world credit crunch and associated economic problems have hit Spain extremely hard.  The country is now formally in recession with unemployment predicted by the Spanish government to rise to 16% during 2009.  Some commentators think that this figure is optimistic (given the previous importance of the now collapsed construction industry) and that it may reach a devastating 20%.  Certainly, tourism, one of Spain’s most vital industries is likely to suffer much worse than 2008 when internal tourism dropped markedly.  The recession in Europe will undoubtedly impact badly this year on Spanish external tourism and further compound the country’s problems.

Like the UK, Spain is also still led by the government that has overseen the property crash.  This means that the very people who have been negligent in their handling of the economy remain in power and are, absurdly, those expected to extricate the country from its current problems.  This is about as optimistic a possibility as entrusting the security of the stable to the very man who left the stable door open and led the horse to a field of ragwort.  

Is there a model of what may happen and how long the crisis could last?  In fact, there is and it is probably that of the UK in the 1990s.  At the time, the UK experienced what was considered to be one of its worst recessions since the 1930s.  Although nothing like as bad as the terrifying 1930s depression, the 1990s was a recession in the UK largely based upon the collapse of the property market and high debt levels.

According to the Nationwide it took some nine years for average property prices to do the V (from their 1989 high point to the corresponding level finally reached again in 1998).  Meanwhile, average property prices reached their low point in the 4th Quarter of 1992 and remained much the same until the 2nd Quarter of 1992 – almost five years of negligible price movement before a consistent subsequent rise.

If you accept that the UK property crash in the 1990s is a roughly acceptable approximate model for Spain in the year 2009 then the logical step is to ask three questions: is the present crisis less bad than the UK in the 1990s, much the same – or worse?

I suspect that no-one in their right mind would suggest that the present crisis is less bad than the UK in the 1990s given the staggering personal and corporate debt in Spain - let alone the effective collapse of the world banking system and global economies.  At best, the present crisis is as bad as the 1990s and there are some very good arguments to suggest that it is much worse.

If, for the sake of optimism, we accept that the present crisis is only as bad as the UK in the 1990s then the conclusion that you may draw is that property prices once they hit their bottom (which I doubt personally has yet occurred) will remain at that level for the next five years.  Equally, any return to previous highs will probably take some nine to ten years.  If the present crisis is worse than the UK in the 1990s - then the length of the present crisis is something about which even I have no desire to contemplate.

One thing is for sure, though, and that is if you need to sell now you need everything possible on your side.  This is no time to be passive or blissfully hopeful.  It is a time for tight pricing, a realistic ‘call’ about the future of the market - and aggressive, knowledgable action to prevent yourself being left in ‘limbo’ for possibly years...

Written by: Nick Snelling.

About the author:

Nick Snelling who is author of ‘How to Sell your Spanish Property in a Crisis’ available from Amazon etc..  For further information or articles see: www.nicholassnelling.com   




Right arrow icon Send to friends   Right arrow icon Printer friendly version    Right arrow icon Submit your own article


Comments:

GuyT said:
05 April 2009 @ 21:03

Meanwhile, average property prices reached their low point in the 4th Quarter of 1992 and remained much the same until the 2nd Quarter of 1992

I think we have a typo here as this doesn't make sense.


Only registered users can comment on this article. Please Sign In or Register now.

Comment Using Facebook:




Related articles in this category

20 Home Staging Tips With a Difference

A Week in Spain

Achieving a Comfortable Temperature in Your Spanish Home

Are The Banks Paying Their Community Fees, IBI, Etc?

Bank Guarantee For Renting Your Property

Big Spanish Property Price Drop – Real Case Study

Bills, Bills, Bills

Can't Afford Your Mortgage In Spain? These Are Your Options

Can't Sell? Rent It Out With Option To Buy

Community Commotion

Coping with the limited space of an apartment

Counting The Costa Locking Yourself Out

Currency Update - Eurozone Jitters

Currency Update - Eurozone Jitters Continue Following Spanish Bailout

Currency Update - Is Spain in Trouble?

Currency Update - Sovereign Debt and the Euro's continued fall

Currency Update - What Is Happening To Europe?

Currency Update April 2011

Currency Update August 2011

Currency Update March 2011

Currency Update: Euroland and US - Where are we at the moment.

Demolitions in Spain

Do I Need To Pay Capital Gains Tax In Spain?

E.T Phone Home....but Maybe not from Spain

Entering a Community and the Role of the President

Euro Currency Update July 2011

Euro Currency Update: October 2011

Euro vs Sterling Currency Market Update

Expats Hit Hard By Property Tax Probe

Furnishing Your Property in Spain

Furnishing Your Spanish Property For Holidays Or Rentals

Getting Your Pool Ready for Summer

Home Insurance in Spain

Horizontal Property Act - Part 1

Horizontal Property Act - Part 2

Horizontal Property Act - Part 3

Horizontal Property Act - Part 4

Horizontal Property Act - Part 5

Horizontal Property Act - Part 6

Horizontal Property Act - Part 7

How Do You Value A Property In Spain?

June Currency Review of Euro Vs Sterling - Things Are Looking Up

Long Term Rentals in Spain

Maximising The Value Of Your Property

Mortgage Arrears – Is "Handing Back The Keys" A Solution?

NIE Numbers And Why They Are Important

Protect Your Home in Spain From Insurance Claims This Winter

Ratable Values Are Being Revised In Marbella

Recovering Community Fee Debts From Overseas Owners

Security Is The Key For Your Home In Spain

Some Spanish Property Market Good News?

Spain Ends Monopoly Of Electricity Supplies – Could Your Community Make Savings?

Spanish Property Market Values - What Is The Truth?

Sterling - Euro Reaches New Highs

Swimming Pool Regulations

Target the Spanish

The Day the Don Juan Community Defeated Don Juan

The Impractical Side Of Spanish Architects

The Nota Simple Explained

The Pound And Euro Face Uncertain Times

The Spanish Property Crisis - How long will it last?

The Stirling Euro Yo Yo Effect

There's Something About Spain

Tips On Selling Your Spanish Property The Distressed Way

Top Sales Tips: Get The Best Out Of Your Estate Agent

Top Tips For Insuring Unoccupied Holiday Homes In Spain

TRG for Sellers

Update On The Euro From Moneycorp

Valenica Land Law Abuses Fight For Justice Continues

Weekly Euro Update - 18 May 2010

Weekly GBP Euro Update - 20 July 2010

What is a comunidad de propietarios?

What The Future Holds For The Spanish Property Market

What to Do If Unable to Pay Off a Mortgage to a Bank in Spain?

What's Happening With Aifos?

Where Is The Eurozone Economy Heading?

Why Do So Many Still Put Spain Down?

Why Is My Spanish Property Not Selling?

Why to Insure Your Spanish Home in UK

Wills in Spain - No Will....No Way

Your Property on the Web - Simple!

Click here for a list of all the articles from our magazine 

Spain insurance services


This site uses cookies. By continuing to browse you are agreeing to our use of cookies. More information here. x