Has the sun set on the Spanish property market?
Above: Estate Agent's window on the Costa Blanca showing villas being reduced as market starts to fall in 2007
The Organisation for Economic Co-Operation and Development has said it. And so has the Bank Of Spain. Property in Spain is overvalued to the tune of 30%. It might not be for much longer though if the much talked about Spanish property crash gathers steam and sends prices spiralling downwards.
House prices in Spain have risen by an incredible 170% during the past decade, fuelled by a heady cocktail of cheap mortgages, rampant speculation and - for overseas buyers at least - the dream of a place in the sun. This has gone hand in hand with the biggest building boom in Europe - 800,000 new properties were built in 2006 alone - more than were built in Germany, France and Italy combined.
While the music played, people were making money hand over fist - at least on paper - and this encouraged more and more people to come into the market.
But it seems like the music has stopped.
On a domestic level, there just aren't enough Spaniards to fill the houses being built - even taking into account the waves of immigrants that arrive in the country from South America and Eastern Europe every year.
85% of Spanish adults now own property and large numbers now own more than one after being tempted by rising prices and record low interest rates.
Wages
however haven't kept up with house price inflation and since 93% of all mortgages in Spain are variable rate mortgages, every interest rate hike hits home hard. The ECB has raised interest rates seven times since the end of 2005 and all expectations are that it will raise them again in May or June 2007.
According to official figures, house prices are still rising in Spain however. Year on year figures for the
first three months of 2007, showed an average rise of 7.2% across the country.
On the Costas though - where an estimated 250,000 Brits own property - the market stalled just before the summer last year and in many areas prices are already falling.
Properties are also taking much longer to sell, not least because of the competition from the huge numbers of new builds currently flooding the market.
The Costas in particular are dependent on the wave after wave of British buyers who are intent on buying property abroad these days. But the numbers heading to Spain could well dry up completely, particularly if the wall to wall negative media coverage of late continues into the year.
As well as talk of falling prices, both the land grab laws and the scandals affecting the likes of Marbella are bound to have a huge impact on the number of people looking to buy in Spain.
A glut of properties coinciding with fewer buyers can only mean one thing.
Falling prices.
filed: 30 April 2007
