Home boom leaves Spain exposed to credit crunch

13th November 2007, Comments 0 comments

13 November 2007, MADRID - The International Monetary Fund yesterday warned that countries such as Spain, that have experienced property booms, could be more vulnerable to a credit crunch deriving from the US subprime mortgage crisis.

13 November 2007

MADRID - The International Monetary Fund yesterday warned that countries such as Spain, that have experienced property booms, could be more vulnerable to a credit crunch deriving from the US subprime mortgage crisis.

In a report on Europe by the IMF's director for the region, Luc Everaert, said that tighter credit conditions could affect corporate borrowing and available funding for investment in construction.

"In the latter case, countries that experienced rapid house price increases (notably Belgium, France, Ireland, the Netherlands, Spain and the United Kingdom) would be most exposed."

House prices in Spain have risen over 150 percent on average since the current surge started in 1998, but are now showing clear signs of slowing.

Everaert said that the Spanish housing sector is in a much healthier state than the US property market. Europe as a whole is also well positioned to withstand the fallout from the subprime crisis, the report said.

According to a report carried out for leading Spanish real-estate companies, demand for housing is expected to slow to 440,000 units a year over the next five years from around 600,000 at the height of the boom. At the same time, it said there is likely to be greater demand for rented accommodation.

[Copyright EL PAÍS, SL. / Adrián Soto 2007]

Subject: Spanish news


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