Spanish house prices have fallen 18% from the peak, according to the Government’s House Price Index. Is that enough? not according to Isidre Fainé, head of La Caixa, Spain’s biggest savings bank, who says house prices could fall 50 to 60pc peak to trough.
Fainé has the biggest branch network in Spain at his command. La Caixa can probably afford the write-downs such a fall would imply. La Caixa are not alone forecasting more big falls. International rating agency Fitch say prices need to fall by 30 to 35pc peak to
Property prices fall in Spain and Tenerife
trough, or almost double what they have so far, before the market bottoms out.
The official index is more misleading than it is revealing. In reality average prices are down somewhere between 30 and 50pc, not the 18pc the index would have us believe. The index is taken at face value by international organisations and publications like The Economist, the OECD, the IMF, the European Commission, not to mention rating agencies like Fitch. Thus they all think Spanish property prices have only fallen 18pc and have much further to fall, when in reality the prices at which homes actually sell have fallen much more than that.
