The Economist’s ranking helps us see how house prices are changing in different countries around the world. It makes comparison easier, and helps to identify where new bubbles might be forming.There doesn’t look like much risk of a bubble in Spain anytime soon. Spanish house prices are down 31 per cent from the peak – the third largest decline of all – and prices are still falling, down 0.2 per cent on a year earlier. On the other hand, Spanish house prices are still overvalued compared to rents and income, suggesting that further falls are not out of the questions. That said, it does look like the big falls have already been wrung out of the system.
Commenting on Spain, The Economist points out that demographics are one reason why Spanish house prices are still declining. “Although Spain’s economy is growing again, prices there are still falling, as they are in France and Italy,” says The Economist. “Spain’s population shrank by 200,000 last year, as the unemployed emigrated to find work. In the three years before the crisis it grew by 800,000 a year.” Population decline is bad news for housing demand.
More countries look overvalued than undervalued in the latest rankings, and relatively speaking, Spain doesn’t look too bad. But which country looks like a real bargain, and in some ways competes with Spain for holiday-home demand? If you can stomach the political risk, and maybe an implied currency risk, this ranking suggests that Greece is the place to go bargain hunting for a holiday home today.