Mon. Dec 17th, 2018

The price of new housing is only 10% below the peak of the housing bubble in 2007

The price of new housing is only 10% below the peak of the housing bubble in 2007


The price of housing continues to rise. This is revealed by the data on the Housing Price Index (IPV) published today by the National Institute of Statistics (INE).

After the explosion of the housing bubble, which peaked in 2007, prices fell gradually, with a special acceleration between 2013 and 2015. The first quarter of 2014 housing prices (new and used) were 37 , 25% lower than in the peak of 2007. Since then, they began to recover, although the acceleration has been more primed in the rent than in the sale, and in fact it is in the first case in which the experts return to talk about an incipient real estate bubble.

How have they increased or decreased the price of housing with respect to the peak of boom real estate? To verify this, we took the IPV for the third quarter of 2007 as a reference. In doing so, the data show that housing is currently 20% cheaper than at that time. As for the price of new homes, this has decreased by only 8%; that of the second hand, on the other hand, has done 29%.

The greatest drop in the price of housing in the last decade with respect to 2007 occurred between 2013 and 2015, as can be seen in the graph. However, for four years it has not stopped rising, more in some communities than in others.

At the regional level -always based on the third quarter of 2007- we find that the communities where the price of housing has fallen the least with respect to that year are Illes Balears and Madrid. In other words: in the Balearics the price of housing is only 10% cheaper than during the real estate boom; in Madrid, 15%.

At the opposite end are Navarra, Aragón and La Rioja. In these three communities the price of housing has dropped between 35% and 41% compared to the peak reached in the third quarter of 2007.

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