Property In Spain Overpriced By 30% Says OECD

Property In Spain Overpriced
By 30% Says OECD

OECD Concern Over High House Prices In Spain

Property in Spain is overvalued by as much as 30%, according to the Organisation for Economic Co-Operation and Development's Economic Survey Of Spain 2007 - and any fall in prices could jeopardise the country's economic stability.

Property prices have doubled in real terms in Spain since 1998 according to the OECD, fuelled by historically low interest rates and an increasing willingness to borrow money on the part of Spaniards (average household debt in 2006 reached more than 115% of disposable income, up from around 45% ten years ago).

"It is becoming increasingly uncertain whether this upswing in house prices can be sustained for much longer," the OECD said in its report, adding that a downward adjustment in price was likely at some stage.

"Such an adjustment could occur in an orderly manner, during which price increases would gradually moderate and stabilise at a more prudent level," the report continued. "However, a more abrupt adjustment in which prices would plunge cannot be ruled out."

House prices in Spain rose by an average of just under 10% during 2006.

filed: 21 January 2007