Three factors will ensure that house prices continue to fall during 2011 with some experts predicting a decline of some 20%.
As part of the central Government’s austerity measures tax benefits for middle income home owners were abolished from January 1, 2011 with the inevitable knock-on effect on house sales. Also adversely affecting sales is the increase in the level of IVA on property sales introduced in the middle of last year. But it is the decision of the Bank of Spain, to oblige the financial institutions to reduce by up to 30% the prices of their “stock” of properties repossessed more than two years ago that experts predict will lead to cheap properties flooding the market and driving prices down further.
Property prices began to fall in 2008 when a “soft landing” was predicted for the construction industry. However, the chronic financial crisis changed the economic landscape, the construction industry in Spain came to a virtual standstill and property prices began to tumble. Nationally house prices have fallen by 12.8% but in the region of Murcia the decline is closer to 16%. Murcia also has 6.8% more empty housing stock than the national average of 2.8%.
This latest move by the Bank of Spain may persuade promoters, previously reluctant to reduce property prices, to do so now. The Bank estimates that the promoters have a stock of between 700,000 and 1.1 million unsold properties.
Furthermore the Bank predicts that the population of Spain will “stabilize” this year and migration will be minimal.
