(1888PressRelease)
February 28, 2007 - According to new figures from the Spanish Mortgage Association, the number of loan packages geared towards home-buying was down 10.6 per cent over the last 12 months on the previous year and properties are remaining on the market for longer periods of time, reports Reuters.
This would suggest that house price inflation in the Iberian peninsula is not what it was, especially because investors in southern Europe have become expectant of dramatic house price rises, as has been the case over the past ten to 15 years.
But industry analysts believe that a strong economy will cushion the fall - inflation is currently running at 2.4 per cent, its lowest level since March 2004 - so that investors will not bear the brunt of a reversal in fortunes for one of Europe's strongest housing markets.
Jose Maria Penalva, of Banco Sabadell in Madrid told Reuters: "There is a gentle slowdown, sales periods are getting longer. It's a sign demand is not as strong as it was, but for the moment it's not a worry."
There are two major reasons for the downturn in the market. First is the rapid rate of construction that has taken the country by storm over the last five years.
As a knock-on effect from the seemingly ever-spiralling house and land prices in the mid-nineties and early 2000s, many property developers have managed to acquire land for building and have since flooded the market with supply.
The second reason for the muted state of affairs at present is the series of scandals that have rocked the country over recent months, combined with ongoing uncertainty over the land-grab law. It will take some time for the trading process to recover its integrity as some buyers may have been warded off by recent reports in the local media of corruption by local authorities.
However, even if the market does take a knock this year, it has a long way to fall. Last year was another stellar 12 months for Spanish property: the Royal Institution of Chartered Surveyors reported that house price inflation stood at 11 per cent last year, while the Knight Frank Global House Price Index stated that prices in the third quarter of 2006 were up 9.7 per cent on the corresponding time a year previous.
