Cooling house market "not catastrophe": report 05/11/2007 00:00

5 November 2007

Madrid - International real-state consultant CB Richard Lewis on Friday dismissed doomsday predictions of a crash in Spanish house prices, and highlighted the strength of demand for office space.

In a report presented yesterday, the consultant said the current slowdown in the housing market after an unprecedented boom did not constitute a "catastrophe" for the sector.

According to figures released last month by the Housing Ministry, house prices in the third quarter were up 5.3 percent from a year previously, compared with rises of 5.8 percent in the second quarter and 7.2 percent in the first. There was also a sharp fall in building permits granted in August.

House prices have risen by over 150 percent since the current surge kicked in about a decade ago, with annual rises at the boom's peak of close to 20 percent.

The CBRE report said it was "logical" prices were starting to slow after the "above-normal" rises seen in the market. It said the cooling down was likely to affect activity more than prices.

CBRE estimated the number of new homes built in Spain rose 65 percent from 525,000 in 2003 to 866,000 in 2006, almost as many as in Britain and France combined, and compared with average growth in Europe of 30 percent.

"In the future fewer new homes will be built," the report said, adding that as a consequence of this the ratio between quality and price, "which in Spain is one of the lowest in Europe," would improve.

At a news conference in Barcelona, CBRE's director of research, Edward Farrelly, estimated about half a million new homes in Spain would be built annually, a figure more in line with sustainable long-term demand.

Farrelly agreed with government predictions that house price inflation would converge with consumer price inflation, which in October was estimated at 3.6 percent.

While the housing segment is slowing, the market for offices in Madrid and Barcelona remains buoyant, with rents continuing to rise and activity still strong, the CBRE report said.

Investment in offices, commercial centers and industrial property in the first half of the year was up 61 percent at €4.7 billion, compared with a rise of only 17 percent for the European Union as a whole.

[Copyright EL PAÍS, SL.]

Subject: Spanish news