Spain’s property prices to fall by 15% in 2014

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Spain propertyAfter five years of double-dip recession, Spain’s economy seems to have stopped sinking. But the recovery will be a prolonged one. Despite having fallen almost 40 per cent since the housing bubble burst in late 2007, home prices in the euro zone’s fourth-largest economy are expected to drop by another 10 per cent to 15 per cent before they stabilise, the International Business Times reported.

“Recovery in the housing sector in Spain hinges on an improvement in employment and access to credit, both of which are prey to uncertainty,” Souheir Asba, an analyst at Societe Generale, said in a note.

Spain has finally overcome a slump triggered by the end of the real estate boom. The country emerged from recession in the third quarter of last year and its economy expanded 0.3 per cent in the final three months of 2013, the fastest rate of quarterly growth in almost six years.

The Spanish government expects gross domestic product to grow by about 0.7 per cent this year, and for job growth to resume in the second or third quarter. The fact that investors are once again buying up Spanish government bonds is a big vote of confidence. As a result, the government is now paying much lower interest rates to borrow money. Yields on 10-year treasury bonds are down to 2006 levels.

On January 23, 2014, Spain became the second euro zone country to exit its international bailout program, after Ireland. The country saw a meaningful pickup in exports last year, but the housing and construction sectors are still lagging behind.

For one, Asba pointed out that the unemployment rate is still too high, at 26 per cent, to call for an impact on household income. Real wages are not expected to grow substantially in the short term either. Moreover, the credit crunch that the country is experiencing has an impact on both corporates (specifically SMEs) and households.

This gap in the housing market has been widening for the last five years. Asba noted that 2012 residential and non-residential construction permits represent a tenth of the 2006 levels due to both the lack of demand and the difficulties construction companies and real estate developers are now facing in starting new projects.

Meanwhile, the total housing stock stood at 25.3 million dwellings by the end of 2012, of which around 700,000 new dwellings are still unsold.

By November 2013, the number of mortgages granted fell by 26.6 per cent year-over-year, which corresponds to 970 million euros and approximately 84 per cent since the end of 2007.

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Reading Time: 2 minutes

After five years of double-dip recession, Spain’s economy seems to have stopped sinking. But the recovery will be a prolonged one. Despite having fallen almost 40 per cent since the housing bubble burst in late 2007, home prices in the euro zone’s fourth-largest economy are expected to drop by another 10 per cent to 15 per cent before they stabilise, the International Business Times reported.

Reading Time: 2 minutes

Spain propertyAfter five years of double-dip recession, Spain’s economy seems to have stopped sinking. But the recovery will be a prolonged one. Despite having fallen almost 40 per cent since the housing bubble burst in late 2007, home prices in the euro zone’s fourth-largest economy are expected to drop by another 10 per cent to 15 per cent before they stabilise, the International Business Times reported.

“Recovery in the housing sector in Spain hinges on an improvement in employment and access to credit, both of which are prey to uncertainty,” Souheir Asba, an analyst at Societe Generale, said in a note.

Spain has finally overcome a slump triggered by the end of the real estate boom. The country emerged from recession in the third quarter of last year and its economy expanded 0.3 per cent in the final three months of 2013, the fastest rate of quarterly growth in almost six years.

The Spanish government expects gross domestic product to grow by about 0.7 per cent this year, and for job growth to resume in the second or third quarter. The fact that investors are once again buying up Spanish government bonds is a big vote of confidence. As a result, the government is now paying much lower interest rates to borrow money. Yields on 10-year treasury bonds are down to 2006 levels.

On January 23, 2014, Spain became the second euro zone country to exit its international bailout program, after Ireland. The country saw a meaningful pickup in exports last year, but the housing and construction sectors are still lagging behind.

For one, Asba pointed out that the unemployment rate is still too high, at 26 per cent, to call for an impact on household income. Real wages are not expected to grow substantially in the short term either. Moreover, the credit crunch that the country is experiencing has an impact on both corporates (specifically SMEs) and households.

This gap in the housing market has been widening for the last five years. Asba noted that 2012 residential and non-residential construction permits represent a tenth of the 2006 levels due to both the lack of demand and the difficulties construction companies and real estate developers are now facing in starting new projects.

Meanwhile, the total housing stock stood at 25.3 million dwellings by the end of 2012, of which around 700,000 new dwellings are still unsold.

By November 2013, the number of mortgages granted fell by 26.6 per cent year-over-year, which corresponds to 970 million euros and approximately 84 per cent since the end of 2007.

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