The Economists Global House Price Index, which tracks the value of residential property in 16 nations around the world, suggests that property in Spain is still overvalued.
Using two metrics to value global property, price-to-income and price-to-rent ratios, The Economist tracks both the affordability and potential future income that could be generated from property in Great Britain, USA, Spain, France, Australia, New Zealand, Italy and Canada amongst others.
Whilst prices in half of these 16 countries are now in decline, compared to just five in late 2010, the average of both these measures suggests that in Australia, Canada, New Zealand and Spain homes are still overvalued by around 25%
Whilst in the US, average house prices are now 8% under the average price-to-income and 22% under the price-to-rent ratios and therefore look comparitvely low, The Economist suggests there is no guarantee of an iminent bounce. Particularly with up to a further 4m foreclosed homes expected to flood the market with additional supply, holding down values. Prices here did fall fast, but mainly due to a sharp increase in unemployment, and as a result foreclosed homes, rather than the long-term overvaluation seen in other countries such as Spain.
Other factors relevant to property prices in Spain are the disposal of an ongoing oversupply of new homes - particularly those being cleared by developers' creditors such as the big Spanish banks - and the possiblity of looming recession in the Eurozone. This could mean that prices in Spain haven't bottomed out just yet.
Take a look at The Economists clever interactive house-price chart here
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