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Spain to launch new house price index

Catherine Deshayes

Come October the 1^st, Spain will no longer be reliant on Housing Ministry figures to track what is happening in the property market. The Spanish Statistics Institute has announced that a new house prices index will be launched in a week's time.

Spain's property market has been defined by extremes over the last few years. As the most popular place for Brits to buy property abroad, Spain's property market was booming thanks to the money being poured in by international investors.

Spanish property prices tripled in a decade to 2007 on a diet of low interest rates and freely-available credit.

Dan Johnson, Director of TheMoveChannel.com, highlights one Spanish destination that was starting to become extremely sought after when the market was booming. "San Sebastian is a fantastic old city with a huge amount of heritage, fine architecture and fantastic countryside in the surrounding area.

"The shores offer some of Spain's best surfing, with breakers to rival the South West coast of France, and it is only a short drive along the coast," he added.

But, the bubble burst and the cycle went into reverse late last year, as rates doubled over two years, and the growing global financial crisis hit the country hard.

Now, property prices in Spain have slumped by around five per cent this year, according to Spanish estate agency firms Tinsa, Facilisimo and idealista.com.

Home sales also fell by 31.5 percent in the second quarter of this year compared to last year, the Spanish Housing Ministry reported earlier this month. Some economists have predicted that the value of Spanish real estate could drop by more than a third.

A Reuters poll has suggested that house prices will fall by three per cent this year and nine percent next year, as lending conditions tighten - mortgage lending tumbled 33 per cent last month- and foreign investors lose confidence and buying power in the market. Inflation is also sitting at almost five per cent, which is heightening the price slump.

The new House Price Index has been introduced after criticism was heaped onto the existing Housing Ministry figures, which analysts said did not give a true representation of the housing slump the country is currently enduring.

The new Index will report quarterly data on new and used homes. The Spanish Statistics Institute has announced that it aims to report the data on a monthly basis, and hopes that the new, more reliable data will form part of Spain's EU-harmonized inflation figures.

Browse property in Spain.

Picture by benidormone