Spanish property bubble 'is about to burst'
27 March 2006, MADRID — Spanish property developers predict house prices will cool down by up to ten percent this year.
27 March 2006
MADRID — Spanish property developers predict house prices will cool down by up to ten percent this year.
The Association of Property Developers says prices for new homes should go down by between five and ten percent in 2006.
Meanwhile, the Bank of Spain recently said savings are falling while mortgage debt is rising.
Consumer spending is also falling rapidly, something the European Central Bank says reflects a "lack of confidence in the economy".
International property experts have said there will be a slowdown in economic growth during this year and 2007 combined with rising interest rates while profits from property sales are likely to fall.
Stan Dickens, Spanish property expert told the daily El Pais there were signs of "overheating" in the market.
"Price rises are such that nobody can deny there is a bubble," he said.
But Gonzalez Bernardos, of Barcelona University, believes there will be a price rise of five percent this year, then prices will start to fall from 2007.
Since 1998, property prices have risen 120 percent.
One of the factors which has kept house prices going up has been the conviction on the part of many buyers that they would keep on increasing.
But a key factor which powers the Spanish property market is tourism.
Foreigners bought 32,000 homes last year.
El Pais says the biggest losers when house start to come down will be people who took out mortgages between 2003-05 when prices were at their highest points and interest rates at record lows.
[Copyright EFE with Expatica]
Subject: Spanish news