Spanish home prices to keep falling until mid-2013

Monday 20th February 2012

Home prices in Spain are expected to continue falling until at least the middle of next year when a signification portion of the country’s existing housing glut should have been absorbed, according to rating agency Standard & Poor’s.

Stringent mortgage lending conditions amid a fragile economy is preventing many would-be purchasers from taking advantage of attractively priced properties which have plummeted in value since the peak of the last property boom in 2008.

With an estimated oversupply of about 800,000 homes, Standard & Poor’s states that the “drop in Spanish house prices shows no signs of moderation”.

The latest home price index published by idealista.com shows that the average price of a home in Spain fell by 9.4% last month compared to January 2011.

The figures provided by the Spanish property portal reveal that January 2012 was the worst month since the Spanish housing crisis started four years ago.

Unsurprisingly, the fall in property prices has ensured that affordability has improved in Spain, based on average property prices versus average gross annual household income, which has fallen from 7.7 years at the peak of the property boom to a current rate of 6.2 years, according to the Bank of Spain.