Spanish House Prices Drop 7.6% Q1 2009
July 1st, 2009
Spanish house prices drop 7.6% in Q1 vs 5.4% in Q4 – First ever recorded fall in new house prices in Spain – Spanish slowdown behind Ireland, UK, recovery seen 2012 – Analysts see double-digit Spanish price falls this year
Spanish house prices fell at their fastest pace on record in the first quarter, after new house prices dropped for the first time, and analysts saw double-digit declines ahead as unemployment spirals.
Home prices fell 7.6 percent between January and March compared to a year earlier, marking 12 months of decline, after a 5.4 percent drop in the fourth quarter of 2008, the National Statistics Institute (INE) reported.
“It’s possible we see declines slightly above ten percent this year,” said Pep Ruiz, head of real estate research at Madrid’s AFI consultancy.
Mortgage lending and house sales have collapsed in Spain, formerly one of Europe’s hottest property markets, after unemployment topped 18 percent, by far the highest rate in the European Union.
Aggravating the Spanish property problems is a chronic oversupply after it built more homes than Britain, Germany and Italy put together at the height of the boom in 2007.
Supply and demand are out of kilter with one in six people out of work, debt defaults up fourfold in a year and at least 600,000 new homes sitting unsold in Europe’s most over-stocked property market.
Spanish banks and builders are so desperate to get rid of homes they are offering bus tours of defaulters’ property being offered at half price or less.
Spanish bank BBVA does not see a recovery in house prices until 2012 given forecasts Spain will be the last economy in the European Union to exit recession, probably in 2011, due to the twin shocks of the global crisis and a housing boom collapse.
Spanish house prices tripled in the 10 years to 2007 but are expected to fall at least 30 percent from their, according to BBVA.
First quarter data showed the deepest fall in INE records going back to January 2007, as well as for Housing Ministry data which recorded a 6.8 percent fall between January and March.
The price of new Spanish homes fell 2 percent year-on-year in the first quarter, while existing house prices fell 12.5 percent, the INE reported.
Spain’s property crisis is less advanced than that of Ireland, another former euro zone economic star, where house prices have fallen for two years but could recover by mid-2010.
British house prices rose for the second month running in June, leaving them less than 10 percent down on a year ago, the Nationwide building society said on Tuesday.
Though Spain escaped exposure to the U.S. subprime assets it risks its own property debt crisis in 2010 as defaults soar among mortgage holders and real estate firms.
Spain’s government on Friday approved a 99 billion euro bank restructuring fund to stop solvency problems at savings banks, which have heavy property exposure, hurting confidence in larger institutions that diversified out of the sector.
Story from Reuters