House prices converge with consumer inflation
Pace of mortgage lending reflects end of property boom.
18 January 2008
MADRID - Housing Minister Carme Chacón said yesterday home prices last year rose by less than 5 percent, confirming Spain's massive property boom is over.
Chacón did not give an exact figure, but she said it was close to consumer price inflation for 2007, which came in at 4.2 percent. The Housing Ministry is due to give detailed data today. House price inflation in the third quarter of last year was 5.3 percent
At the height of the decade-long surge in the housing market home prices were growing at rates of close to 20 percent annually, preventing lower-income groups from getting a foot on the property ladder.
The government has been trying to remedy the problem by developing the rental market and by stepping up the construction of government-protected housing (VPO) units, which sell at prices well below those in the free market.
Chacón told a news conference there were 91,160 VPO housing starts in the last 12 months, an increase of 1.5 percent over a year earlier.
In a separate statement, the Housing Ministry said yesterday total housing starts in the 12 months to September of last year totalled 693,708, down 4.9 percent from the previous year.
Meanwhile, Spain's biggest lender Banco Santander predicted the mortgage loan portfolio of the Spanish banking sector would grow by only 4.0.-4.5 percent this year, while the number of new housing loans granted would drop by between 10 and 20 percent.
According to figures released last week by the Spanish Mortgage Association, the pace of lending in the 12 months to October slowed to 16.8 percent, the lowest level in a decade.
The head of Santander's retailing banking division, Enrique García Candelas said total banking lending this year would fall slightly to between 10 and 12 percent.
The construction sector, which has been one of the motors of strong economic growth in Spain, is already starting to feel the impact of the slowdown in the housing market.
The European Union's statistics office Eurostat reported Thursday that output in the Spanish construction sector fell by 3.9 percent in November 2007 from October, the biggest drop in the bloc.
[Copyright EL PAÍS / Adrián Soto 2008]
Subject: Spanish news