The Latest Spanish Property News from Kyero.com

Not only are Spain's economic woes a more extreme version of what's happened in the past year in the U.S. and U.K., they're likely to last longer because of the shallow roots of Spain's recent economic success. A strong rebound isn't out the question, if the government undertakes key reforms, but it's unlikely to happen anytime soon.

Spain's economic boom was dependent on its construction sector, fed by E.U. development money and rapid population growth. Now that property prices are slumping, there's little for Spain to fall back on. An export-driven recovery is unlikely after years of declining competitiveness exacerbated by a strong euro.

The speed of the crisis took the Spanish government by surprise, with economic growth slowing to the worst rate for 15 years. While in April, it became the first euro-zone administration to craft a U.S.-style stimulus package including tax cuts and spending measures, worth 18 billion euros ($24 billion) over 2008 and 2009, analysts predict a recession in Spain by year-end.

That said, Spain's not necessarily condemned to the sluggish growth and weak public finances typical of southern European neighbors like Portugal and Italy. Conservative regulation has left the banking sector in better shape than much of the rest of Europe even if smaller banks could be laid low by the domestic housing crisis.

As for government finances, the public accounts fell into the red in June for the first time in three years. But the Spanish exchequer remains in a healthier position than much of the rest of the euro-zone where deficits are widening. Madrid has more room for maneuver.

The test is whether the government will restructure the economy, notably a rigid labor market, to improve productivity and diversify sources of growth. The current focus on boosting welfare provision -- raising minimum pension benefits by 6% as well as increasing the minimum wage -- doesn't bode well.

Story from Wall Street Journal

Is any property below €50,000 a cheap Spanish property? Are cheap Spanish properties only to be found at auction or as bank repossessions? How much below market value does a Spanish property need to be to be considered cheap?