Real-estate market: discounts of over 30% if the houses are sold

When discounts in the price of new housing exceed 25%, there is life in the real estate industry. However, it is not excessive. Metrovacesa have sold off 40% of the houses they offered, with discounts of up to 55%- even though at this rate there were only two, it is an indicator of where the brick market is going. Two-thirds of the sales are concentrated in houses with prices below 150,000 Euro.

It is the day before the end of the Metrovacesa campaign, the most aggressive so far in the Spanish market with the slogan "no one had dared go this far." The company, now controlled by the banks that were creditors of the Sanahuja family, have sold 96 of the 274 houses- 37.5% of those are offered in 42 developments spread out over Levante, Costa del Sol and cities such as Madrid, Barcelona, Seville and Valladolid with discounts between 15% and 55%.

The figures are indicative of what discounts potential buyers are willing to accept and how much building societies and banks can finance in the debate on how far lower the price of housing in Spain can go.

Of the houses sold, about a third have been discounted from 40% to 55%, almost half of the sales from 30% to 40% and the remainder in the range between 15% and 29 %. Clearly, though without any euphoria, there are buyers when there are significant discounts. However, the interest shoots up when the housing prices do not exceed 200,000 Euro. Almost two thirds of the houses sold were below that level. It is an attractive price; it is an indicator of how far Spanish families can finance themselves in economic crisis and an indicator of the cut of point for credit in banking offices in Spain.

Spanish developers are trying to dispose of their stocks on the market while it is forecast that prices will continue falling. As well as Metrovacesa, other real estate agents such as Roane have announced discounts of up to 62% on housing prices in the past few days; Vallehermoso, Realia and Parquesol are quoted as reaching 38% and auction specialists such as Atisreal, CB Richard Ellis and Tulip offer discounts of between 30% and 40%.

These cuts are occurring during complete confusion in the sector. There is no agreement on housing stock- construction management say there are 325,000 against the one million and a half proposed by the companies. There is also no agreement as to how much lower the price of housing can go.

According to the latest ranking by The Economist, Spain is the second country in the OECD after the Netherlands for overvaluing house prices. They are overvalued by exactly 54% according to the weekly periodical, a figure that coincides with the maximum discount that Metrovacesa applied in its campaign, even though the 55% applies only to two houses in the province of Castellon.
Returning to the projections, the OECD itself claimed in its 2007 report that house prices were 30% above their fair value. For its part, the Bank of Spain has warned on several occasions that the overvaluation could exceed 20%. Meanwhile, the official figures are on their own. At the end of the first quarter of 2009, house prices have dropped by 6.8% to 1958.1 Euro per square meter. These figures represent a return to levels in the second half of 2006.