Astroc slump fuels fears building boom to burst
24 April 2007, MADRID - Spanish property stocks fell on Tuesday prompting fears the construction bubble could burst sooner rather than later.
24 April 2007
MADRID - Spanish property stocks fell on Tuesday prompting fears the construction bubble could burst sooner rather than later.
One of the catalysts for the panic was the 60 percent slump on shares of developer Astroc Mediterraneo SA last week.
Analysts said Astroc may have been hit by potentially negative new legislation restricting land development in Astroc's Valencia home base.
more worrying for the companies as their image is being damaged,' the analyst said, referring to comments from Eiffage chairman Jean-Francois Roverato on a possible downwards revision in the valuation of bidder Sacyr Vallehermoso SA's domestic property assets.
One analyst said Astroc's problems appeared to be spreading to the rest of the sector, which has enjoyed massive growth in recent years.
"With property prices set to fall or at best stagnate, investors are looking to reduce exposure to a high risk sector, where the bubble is set to burst,' he said.
"It was just a matter of time before the property market fell on its face in Spain... the prices have been exorbitant for too long."
If the property sector slumps it could have a major effect on the Spanish economy.
"But what is worrying really is the impact of this crash, if it is on the cards, for the Spanish economy as a whole... It has been driven largely by the property boom,' an analyst at a leading US fund management house said.
Bank of Spain governor Miguel Angel Fernandez Ordonez played down fears of an imminent property crash, noting mortgage loan growth, while slowing, is still showing signs of important growth levels.
"I think what we are seeing is a gradual slowdown," he said.
The managing director of a UK real estate agent based in Murcia, south east Spain, told Thomson Financial News the fact supply is now outpacing demand on Spain's coastline, where many foreigners have their second homes, is leading to a correction in prices.
"Many of the UK investors are becoming more discerning when it comes to buying their Spanish holiday homes, or in some cases, first homes...I don't see a property crash, but the market will correct," he said.
[Copyright EFE with Expatica]
Subject: Spanish news