EU report: Spanish property still
Posted on October 8, 2010 by Mark
House prices in Spain are still 17pc too
high, argues the latest quarterly report on the Euro-zone
economy published by the European Commission. But that
conclusion might have more to do with Spain’s dodgy data than
inflated house prices.
As far as the Commission is concerned, property prices in
Spain are now the most over-valued in the Euro-zone, despite
one of the biggest housing bubbles and busts in Spain’s
Prices have fallen across the Euro-zone, by 8.3pc, but that
still leaves average Euro-zone property prices 3pc too high.
Nevertheless, the correction is largely completed in Europe,
though not in the US, where prices are still 10pc too high,
argues the report.
The situation in Spain is not so comforting. Prices have
fallen by 18pc since the peak, outstripped only by Ireland,
where prices are down 37pc and counting. But despite the
second-biggest fall in Euroland, Spanish house prices are still
17pc too high, as far as the report’s authors are
The report also claims that, at the end of 2008, Spanish
property prices were the most inflated in the EU, at 24pc
over-valued, followed by the UK (18pc) and Finland (15pc).
Germany and Holland were the only Euro-zone members without a
property bubble. In the US, prices were 15pc too high.
I should point out, however, that the problem with this
report, and all those like it, is it is based on dodgy data, at
least as far as Spain is concerned. Spain’s official data for
the housing market significantly understates the extent to
which property prices have fallen. From what I can tell prices
have fallen more like 30pc, though nobody really knows. The
point is leave aside official data, and Spanish property
doesn’t look so over-valued.
The Spanish government would be doing itself a big favour if
it found a way to publish more reliable data. Doing so would
avoid reports like this telling the world that Spanish property
is still wildly over-valued when it might not be.