Spain’s Property Market in Freefall
March 28th, 2008Via: Independent:
Spain’s once-booming property market is in freefall, official statistics have revealed for the first time.
The announcement that house sales had plunged has dashed government hopes for a “soft landing” in the sector that has driven the Spanish economy for more than a decade.
The buying and selling of homes fell by 27 per cent in January compared with the same period last year, Spain’s National Statistical Institute (INE) announced yesterday. The collapse coincided with a 25 per cent fall in the granting of mortgages, the biggest drop since 2004. The size of individual mortgages has also fallen, by nearly 4 per cent, as providers fear for the security of their loans.
The indicators published by the state organisation for the first time confirm the widespread fear that Spain’s property sector is not just cooling off, but falling sharply. “We have to accept this is not a gentle correction, but a full-blown crisis. We can only hope it will be sharp and short,” says Fernando Encinar, a director of Spain’s leading online estate agent, idealista.com.
The news will scare millions of Spaniards – and hundreds of thousands of Britons and other northern Europeans – who stretched themselves to get mortgages on homes they believed were a cast-iron investment.
Miguel Blesa, president of the Caja Madrid savings bank, Spain’s second leading mortgage provider, warned that things would get worse. “There will be more problems in the property sector in coming months, since the market in new homes is paralysed,” Mr Blesa predicted.
“Many people thought that buying property, especially a second or third home, was an investment to make a profit. Now we’ll see cascades of these homes up for sale.” Mr Blesa was speaking in Vienna, where his savings bank yesterday inaugurated a new headquarters to handle credit lines for big construction companies operating in central and eastern Europe.
