Spain: Housing prices in freefall
Posted by admin May 07, 2008
Citing El Pais, Expatica.com’s Spanish division notes the ongoing troubles in Spain’s housing market:
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.
- Source: Housing Prices in Freefall, Expatica, May 1, 2008
