The latest PIMS index reveals some worrying news about the Spain property market…

In the space of two months the Index of Market Sentiment, published by Property Investment Management Spain (PIMS) has fallen from 2.2 to 1.

This is a drop of over 50% and indicates a significant shift in market sentiment. The most optimistic score is 4 and the most pessimistic score is 0, which seems to suggest that the current market is considerably more pessimistic now than it was two months ago.

Transactions are down 40% compared with February 2007 and sales are 60% down compared with September 2007. Prices have come down but they haven’t collapsed. The questions is…why?

A spokesperson for PIMS offered the following explanation: “The government has announced tax concessions and other measures to encourage lettings; Developers are taking advantage of these and introducing rent with an option to buy schemes

”The occupier rents the property with an option to buy at a date in the future at a price which is fixed now. If they take up the option the amount they have paid in rent between now and then is discounted from the purchase price".

Waiting game

A spokesperson for Kyero.com added: "The general impression amongst agents is that there are plenty of buyers out there but they are waiting for prices to come down.

“We also know that mortgages are available in Spain so long as you are not “sub-prime” i.e. you can genuinely prove an income of 3 or 4 times what you are borrowing and you are able to deposit 10 or 20 percent of the purchase price.

“Spain remains the favourite location for the British to buy holiday and retirement homes. Perhaps when the market does come back it may come back quite strongly."