Spanish Property Market

By: Jim Barnaby
It was Mark Twain who uttered the famous quote: "Rumours of my death have been greatly exaggerated", but the same could have been said more than once this year for the Spanish property market,which is looking like anything but a corpse right now.

While the market in the country has undergone a correction this year, that, the evidence would suggest, is all it is. Rather than filling the obituary column, it may be better to acknowledge the evidence that Spain remains a strong and sound market, even if it is not growing as fast as before.

The recent Halifax survey of European house prices showed the extent of the boom over recent years, with Spain enjoying a doubling of house prices between 2001 and 2006, including a 60 per cent rise over the last two years of that period. Not only did the growth surpass that of any Eurozone country: it surpassed booming Britain as well.

More recent evidence shows that while the bubble has deflated a little, it has not burst. Estate Agent Knight Frank's latest figures on all overseas property prices,up to the second quarter of 2007, show a fall to 7.8 per cent property price inflation, compared with 9.6 a year ago.

Europe has been a major factor in this decline, with several countries seeing price growth falling.

Yet, homemove.co.uk notes, the one country which has escaped this trend "relatively unscathed" is Spain, with a five per cent rise in prices. While this may seem rather modest compared with recent years, it is still way ahead of countries such as Ireland, which far from being a Celtic tiger in this regard has seen growth drop to 0.9 per cent in the last year.

Perhaps it is inevitable, however, that predictions of doom will not go away. The old mantra of "boom and bust", which assumes one invariably follows the other, has been evident in Britain this week. Liberal Democrat treasury spokesman Vince Cable used precisely this reasoning this week to claim Britain's housing market was on the brink of suffering a major plunge.

Following this, the Daily Telegraph reported that Spain was facing "frightening parallels" with Britain, with some analysts tipping a housing crash as well as similar banking liquidity problems to those experienced by Northern Rock. However, the paper reported, the Spanish government is having none of it, with David Taguas, the prime minister's chief economic advisor, saying: "To talk about severe adjustments or a meltdown in prices is ridiculous. That sort of crisis is unthinkable."

Of course, such comparisons with Britain depend on the assumption that our own country is on the brink of a 1990s-style slump, something the Royal Institution of Chartered Surveyors said there was a one-in-ten chance of. But even that assessment was dismissed by Peter Damesick, head of property research for CB Richard Ellis, who said the odds on such a crash were "pretty small", given that the economic circumstances were so different from the early 1990s, with the overall economy in far better shape than in those recession-hit days and interest rates lower.

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