A new report from the Economy Observatory of the Juan de Mariana Institute (OCE) in Spain has estimated that house prices in Spain are still 24% overvalued when compared to the long-term average.

The OCE uses the traditional property price compared to rents ratio (also called the price-earnings ratio or PER), and it compares the value of a property compared to its income from rent. High multiples of 20 for example, reflect a rental yield of 5%.

According to research by the OCE, average national property prices in Spain last year were €2,476sqm and rents were €97sqm, giving a PER or 25.6 years, or an average rental yield of just 3.9%.

This compares to a long-term average of 19.5 years, (5.1% yield), suggesting that Spanish property is still 24% too high, report the OCE. In 2007, at the height of Spain’s property price boom, the OCE reported that house prices were 40% over-valued, so the falls in Spanish property prices have so far not gone half as low as the OCE is expecting.

Regarding the very slow pace of property price falls in Spain, the OCE estimates that it could take another four years for prices to return to their long-term average, or up to 10 years if price declines continue to slow.

Meanwhile, a Spanish court has upheld the right of investors in a failed property development to have their deposits returned to them, after a local bank attempted to shirk their responsibilities under the country’s guarantee laws. However, the court upheld the national guarantee law, and stated that the guarantee period could not expire whilst the investor still had no property to show for their funds.