topics
tools
Expatica countries
Index Last Var.(%)
BEL 20 2119.44 0.28
DAX 6339.94 0.38
IBEX 30 6543 0.13
CAC 40 3047.94 0.32
FTSE 100 5351.53 0.03
AEX 292.76 0.23
DJIA 12454.83 -0.60
Nasdaq 2837.53 -0.07
FTSE MIB 13154.8 0.36
TSX Composite 11576.47 0.09
ASX 4081.2 -0.61
Hang seng 18713.41 0.25
Straits Times 2772.75 -0.24
ISEQ 20 500.94 1.55
You are here: Home News Spanish News Housing prices in freefall

Spanish News

archive
Enlarge font Decrease font Text size


01/05/2008Housing prices in freefall

Brussels forecasts a longer and deeper crisis for Spain than the one predicted by Solbes

THE ACUTE shrinkage of the residential construction industry in Spain, and the credit crisis, are the principal forces behind the intense deceleration of the Spanish economy and the corresponding rise in unemployment. Daily statistics and predictions from international institutions confirm that the housing market is going through a profound adjustment, and there now only remains a certain degree of controversy about the speed and intensity of this adjustment.
On Monday the European Commission reduced its forecasts for Spanish growth this year and in 2009 to 2.2 percent and 1.8 percent respectively, against the 2.3 percent announced by Pedro Solbes for both years - due precisely to the freefall of housing prices in recent months. This forecast is considerably more pessimistic than that of the Spanish Economy Ministry.
Joaquín Almunia, the European Economy Commissioner, calculates that activity in the Spanish real estate sector will diminish by as much as a third during the next three years, and that this process will raise the unemployment rate to 10.6 percent in 2009.
Almunia's predictions are founded on reasonable arguments, and seem a logical consequence of the sharp shrinkage of an activity that, during the last eight years, has significantly contributed to growth and employment in Spain. But they express only one of the possible courses the deceleration may take.
The unforeseen rapidity with which the Spanish housing market is falling seems to indicate that it may well bottom out earlier than the most pessimistic forecasts say it will. And while this circumstance will not spare the Spanish economy a high cost in terms of employment, it does hold out some hope for a moderate recovery of growth by the middle of 2009.
The European Commission itself notes in its report that the adjustment of the housing market in Spain is likely to stabilize at around 450,000 built housing units per year, while the annual rate of growth in the last seven years has been over 800,000. At the present rate of deceleration - the purchase and sale of houses diminished in February at a year-on-year rate of 24.4 percent, after falling to 27 percent in January - this lower limit might be reached in early 2009. The construction industry will touch bottom probably between the third and fourth quarters of this year, and it is at that time that we are likely to see the worst rate of unemployment.
This is only one other probable scenario, which does not contradict the realistic description offered by Brussels. We have to keep in mind that the credit crisis stemming from the United States has been distorting our perception of the duration of the deceleration that is affecting both Spain and the European Union as a whole. Perhaps by the beginning of 2009 the financial entities will have cleared away a great deal of the confusion, contamination and distrust caused by junk mortgages. Then it will be possible to estimate to what point the worsening economic situation is going to decline. Meanwhile we had better fasten our seatbelts to weather the turbulence to come.
El Pais


0 reactions to this article

Be the first person to add a comment

General rating:

Rate article:    Add my rating



0 reactions to this article

Be the first person to add a comment
Discussion Forums

Technology in Spain

Sat phones/internet links

English in Spain

What is the best travel insurance cover to Spain?

American in Spain

U.S. citizens, plan to vote in 2012? Did you know...

Relocation to Spain

thinking of moving to madrid

Jobs in Spain

Job Agencies or how to find work.

participate in the forums

Inside Expatica
Editor's Guide: Getting Started in Spain

Editor's Guide: Getting Started in Spain

Expatica's Getting Started section will provide practical information on how you can open a bank account, exchange your driving licence, improve your Spanish, and more.

Groups and Clubs in Madrid

Groups and Clubs in Madrid

Here's a guide to an extensive list of groups and clubs in Madrid for expats, from sports groups to social and family gatherings.

Groups and Clubs around Spain

Groups and Clubs around Spain

A brief introduction to our Tax section for Spain, from help with inheritance tax to accounting advice.

Groups and Clubs in Barcelona

Groups and Clubs in Barcelona

Here's a short introduction to our Banking section for those living in Spain, from what to ask the experts to opening a Spanish bank account.