House prices Fall by 34.4% Bank of Spain say06/06/2013
The Bank of Spain estimates that house prices have fallen by 34.4% in real terms since the beginning of the adjustment process in the second quarter of 2008.
This is according to their 2012 Annual Report, which also notes that the downward trend has continued in the first months of 2013, although at a “slightly more subdued pace”. This percentage is higher than that estimated by the Ministry of Public Works, of 27%.
The organisation, governed by Luis Linde, explained that in light of the “intense” pace of decline in the number of housing permits in the second half of 2012, “it is expected that residential investment will continue to fall in 2013″.
However, they added that the regional differences observed in relation to the degree of absorption of unsold properties “suggest that the eventual point of recovery for residential investment may come sooner in some geographic areas than in others.”
In particular, they noted that there is a high concentration of surplus properties in coastal regions, with a high proportion of second homes, where the housing boom was particularly strong, and where the current volume of purchases of new housing is very low.
By contrast, El Mundo reported that other regions such as Madrid, Aragon, the Basque Country, Asturias and Galicia, are noted for having a volume of unsold homes “much smaller in relation to the overall total”. The Bank of Spain also noted that residential investment in 2012 “continued to be limited by the depth of the correction of the real estate excesses of the past” and fell for the fifth consecutive year.
According to the report, all this is “in an environment of weak demand for housing, continuing the downward trend in real estate prices and persistent high ‘stock’ of unsold homes, which delays the start of any new construction”.
On the other hand, the Bank of Spain believes that the elimination of the tax deduction for house purchases, along with the abolition of the super reduced VAT rate of 4%, effective from 1st January 2013, “are measures which will help equalise the tax treatment of home ownership and rentals”.
These tax changes, together with the adoption of the new Tenancies Act, “introduces greater freedom of the parties” in the conclusion of contracts, reducing the mandatory deadlines and eliminating mandatory CPI indexing, and “should generate an increase in the proportion of rental housing,” said the regulator
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