How much my house worth?


Spain is facing a new problem: determining the real price of houses remaining empty and offered for sale from the real estate boom in 2007, writes The Wall Street Journal.

Spanish Public Works Ministry said that the price per square foot of homes available for sale decreased by 11% of the peak reached in 2007. On the other hand, the data from ever, an assessment company in Spain, the company recently bought by Advent International, showed a decrease of 18% over the same period.

Analysts, economists and even the houses owners to consider selling that data coming from the government and even some large companies underestimate the fall in prices of real estate assessment.

This causes confusion and it removes the investors who could help banks get rid of the large number of houses that have entered into possession. The discrepancies are largely due to how the Spanish housing prices are calculated, because data is not based on actual sales prices, but rather on assessments made by private companies in a market where almost frozen depend to a large extent price demanded by the purchaser. In this case, the result is a variation of the estimated values of homes.

These differences are important for investors, given the state of the Spanish economy in the European financial crisis. Saving Greece and Ireland have failed to reduce concern about the spread of crisis in other countries. Investors are now worried about the fact that Portugal will need outside help and that the next target country is Spain.

2007 real estate boom has raised housing prices by more than 100%, according to a study by Luis Garicano, professor at the London School of Economics. According to the same report, the Spanish market accounted for two thirds of the units built in Europe between 1999 and 2007.

Currently, however, given variations in the data, it is difficult to get the true picture of housing price decline and hence the economy of Spain. One risk is that uncertainty about the actual property values do not show the amount of potential losses from bank balance sheets. Banks own real estate worth 60 billion euros (82 billion dollars), according to the Bank of Spain. “This could mean that banks might be forced to make large provisions for a long time to come,” said Andrew Lim, banking analyst at Matrix Corporate Capital in London.

After every boom there is usually uncertainty about the actual price of the property due to factors such as seasonality or unregistered transfers. But observers say that in Spain it is acute for several reasons.

Another official index of house prices comes from the National Statistics Institute of Spain and is based on notarial documents for sale. According to him, prices have declined from 2007 to first quarter of this year by 11% and in the second quarter and came back with 2%. However, economists, agents and some notary officials say that prices do not offer real selling prices, because during negotiations transactions prices can change. This can lead to lower prices than the real ones, to minimize tax fees. However, the exact annual number of transactions is unknown.

Spanish Prime Minister Jose Luis Zapatero, said that prices have reached bottom and then began to recover. Statistics from the Ministry  looks different, however, the quarterly rate of decline has slowed.

Mark Stucklin, general manager of Insight, a site that sells homes and provides information on buying homes in Spain, said he was “a gap between official figures and reality.” He, other real estate agents and economists said that prices will continue to decline in 2011, while the Bank of Spain put pressure on the banking sector to sell their properties. Also, they added that the lack of clarity in determining house prices and scares off potential investors who could help the housing market recovery.

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Posted by M Cosmin on Dec 3 2010. Filed under Business, Featured News. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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