MADRID / BARCELONA – Mariano no longer believes in statistics. From his real estate agency in central Madrid, he has seen apartment prices plunge over the past year, even though official figures suggest property prices have barely moved or have even gone up.

The few homes Mariano has managed to sell since the crisis erupted went for 20 percent less than they would have a year ago, even though statistics released by the Housing Ministry suggest that average property prices across Spain are 0.4 percent higher than 12 months ago.

The National Statistics Institute (INE) says they are down a marginal 0.3 percent, while the real estate appraisal firm Tinsa offers a somewhat more credible estimate of a 5-percent decline based on a more selective sample.

Mariano is not alone in questioning the accuracy and veracity of the official figures. Like other real estate agents he believes the models and data used by the Ministry, INE and others fail to accurately reflect the real situation.

It is a surprising U-turn from an industry that just a few months ago was swearing that house prices could not fall or, at worst, would only fall slightly despite a clear excess in supply and shrivelling demand due to tighter credit conditions and weaker economic prospects.

Now, however, those same real estate developers and sellers are eager to get the message out that the market has found a bottom - even though no one can tell for sure when that will be. In their eyes, official figures showing double-digit declines may actually encourage would-be purchasers to buy.

"House prices won't fall anymore because they already have on several occasions. No one should expect drops of 30 or 40 percent because before that happens [developers] will just hand them over to the banks," argues Guillermo Chicote, the president of the Spanish Association of Developers and Constructors.

Indeed, in some areas of the country such staggering price drops have already occurred, though not in sufficient numbers to affect more broad-based official statistics.

Fina Fonts, for example, has been trying to sell her 117-square-metre apartment in central Barcelona for the last two years. When she put the property on the market in October 2006 she priced it at EUR 780,000 - roughly EUR 5,700 per square meter and slightly above the average for comparable properties at the time. After failing to find a buyer, the real estate agency suggested that she drop the price. She did, slashing the asking price to EUR 457,000 - a more than 40-percent reduction.

Though that may be an extreme case, representatives of Barcelona's real estate industry said they expect to see a 10-percent fall in prices across the board by the end of 2008 as sellers who had remained optimistic give up hope.

"Many owners have tried to wait to see if someone would show up, but that is no longer the case," one agent says.

Such trends take a while to filter through to official statistics, which also face another obstacle when it comes to accurately portraying the state of Spain's real estate sector.

Both the Housing Ministry and INE do not base their figures on asking prices or even confirmed sale prices, but rather what appraisers say a property is worth. That tends to undervalue properties when the real estate sector is booming and overvalue them when it is in decline.

12 January 2009

text: El Pais / Luis Doncel / Lluis Pellicer / Expatica
photo credits: chrischappelear, paraflyer and yearofthedragon