First home price drop for 15 years 'imminent'
26 November 2007, Madrid - The value of new and used homes in Spain could start to fall in 2008, marking the first decline in real estate prices nationwide in 15 years, new reports from banks and analysts suggest.
26 November 2007
Madrid - The value of new and used homes in Spain could start to fall in 2008, marking the first decline in real estate prices nationwide in 15 years, new reports from banks and analysts suggest.
So far, market watchers are predicting that the declines will be small. BBVA, for example, is forecasting a price drop of 1.9 percent in 2009 after marginal growth next year, while ratings agency Standard & Poor's is expecting zero growth in 2008 followed by a 1.1-percent decline in 2009. Deutsche Bank is less optimistic. It expects prices to start falling next year and drop even more sharply in 2009.
"It is very probable that prices will fall in 2008. That could cause alarm and accelerate the adjustment, especially taking into account the tighter lending conditions," Deutsche Bank warns in a recently published study.
The current predictions contrast with what real estate analysts, property developers and many banks were saying just a few months ago, when most were confident that Spanish home prices would experience slower growth after a 10-year boom but would not move into negative territory. That line has also been maintained by the government, which is maintaining predictions for a 4-to-5 percent increase this year.
"Almost all families have the largest part of their wealth invested in their home. With elections around the corner, politicians don't want to tell Spaniards that their wealth is going to be devalued," says José Barta, a real estate analyst.
Barta notes that real estate developers are now "deeply worried."
[Copyright EL PAÍS, SL./ LUIS DONCEL 2007]
Subject: Spanish news