Million dollar answer: Yes house prices could fall 07/11/2006 00:00

7 November 2006

MADRID — Spain's economy minister admitted there was 'theoretical risk' of a fall in house prices.

But Pedro Solbes said this was not likely.

The minister was speaking at the meeting of the economics ministers of the European Union on Tuesday in Madrid.

Solbes said a fall in house prices was the 'million dollar question'.

But he said in former financial crises, caused by a property bubble similar to the present one, the average prices had fallen drastically.

Joaquín Almunia, European commissioner for economics affairs, warned on Monday Spaniards were taking on too much debt and predicted house prices would fall.

Solbes said there had been a moderation in the rise in house prices.

But they were still increasing above the rate of inflation.

"Could we see a crisis situation? We don't think so," he added.

"Obviously there is a potential risk because house prices have risen so far, but the current data suggests this will not happen."

Solbes added only three in ten mortgages had so far been affected by rises in interest rates so far.

These were mortgages taken out before 2002, when interest rates were higher.

[Copyright EFE with Expatica]

Subject: Spanish news