Repossessed residential properties in Spain sold on average for about 72% less than their original value during the first half of 2013, according to data compiled by Fitch Ratings.   The sharp drop in property values are ‘emblematic of the dysfunctional state of the property market’ characterized by a supply and demand mismatch, director Carlos Masip stated in the report.

The average discount available for a repossess property has increased from 59% last year and 42% in 2009, according to the report, which analysed 7,406 properties sold since 2009. 

National house prices in Spain have dropped approximately 40% since the peak in 2007, according to various media reports.

The market is now attracting foreign investors interested in profiting from distressed properties and Blackstone Group, the largest owner of single-family homes in the US, is reportedly looking to recreate the investment model in Spain. Last July, the private equity giant agreed to buy 18 apartment buildings from the city of Madrid for €126m.

However, Fitch warns the increased interested from foreign investors is not a sign of a market recovery, but rather opportunistic bargain hunting. ‘The volume of portfolio purchases has not so far reduced the excess supply sufficiently to underpin a true market recovery,’ Masip stated.