Housing prices in Spain dropped by 8.3 percent during the second quarter of the year, compared to the same period in 2011, which is the major decrease since the crisis begun, according to the Ministry of Public Works.

After this new decrease, which is more than the 7.2 percent drop during the first quarter, the new average price for housing is €1,606.4 per square meter, which is the lowest price since the beginning of crisis.

The economic crisis in Spain has had a devastating effect on the housing and real estate sectors, which in turn, helped cause the very crisis.

Consequences of building bubble

Huge amounts of apartments that were built during the ‘construction bubble’ of the prosperous years in the late 1990s and beginning of 2000s, which now remain unsold, while banks, real estate agents, construction firms and private investors are trapped with loans in the sector.

The new average price on the open markets is 23.5 percent lower than the highest average price of €2,101 which, according to the statistics, the housing price reached in the beginning of 2008, just before the building bubble burst.

Compared to the previous quarter, the price fell by 2.6 percent in the second quarter. On an annual level, prices are falling in all the Spanish regions, although in five regions the decrease was considerably higher than the national average.

These regions include Andalusia, where the price dropped by 11.2 percent compared to the previous year, Catalonia (-11.1 percent), Madrid (-10 percent), Aragón (-9.1 percent) and Valencia (-9 percent).

On the other end of the scale, where prices fell least, were Cantabria (-0.7 percent), the Basque Country (-2.5 percent), Murcia (-5.6 percent) and Navarra (-5.9 percent).

Second hand housing decline most

Second hand housing, which includes property constructed over two years ago, dropped most – by 8.4 percent – arriving at an average price of €1,593 per square meter. In Catalonia, it dropped by as much as 11.3 percent and in Madrid by 10.6 percent.

For new housing constructed less than two years ago, the average price was at €1,645 per square meter by the end of June, which equaled a decline of 7.1 percent compared to the price a year earlier.

In some regions, however, these prices dropped more, for instance in La Rioja (-11.8 percent), Andalusia (-11.5 percent) and in the Canary Islands (-11.2 percent). The smallest change was registered in Cantabria, where it only dropped by 0.2 percent.

This article was translated and edited by Stina Lunden.