Spanish Property Prices Down by 2.5%

The fall in asking prices for Spanish property accelerated to as much as 5 percent in the third quarter of 2008, according to Idealista.com.

Idealista said prices fell by between 2 and 5 percent compared to between 2 and 4 percent in the second quarter, but added final sale prices may have fallen further because the study is based on prices listed, not those which the buyer and seller finally agree.

The study, based on the cost per square metre of 77,402 homes advertised on its website, showed that prices in Barcelona fell 5.3 percent, Madrid 1.5 percent and in Valencia 2.4 percent.

In only 24 of Spain's 267 municipalities did the average price rise, it said. Most analysts say that Spanish house prices are 20-30 percent overvalued after a 10 year property boom fuelled by cheap credit and historically low interest rates.

The boom turned to bust last year as borrowing costs rose, the supply of new houses spiralled and house prices increased even further as a proportion of household income.

"For years we have seen an enormous effort on the part of the buyer to match asking prices, but now it is they (the sellers) who have to sacrifice to be in reach of what buyers can pay," said Idealista's head of research Fernando Encinar.

"The owner who really wants to sell his house will have to advertise it at a very attractive price if he wants to close the deal, discounting more than he could ever have imagined."

story from Reuters