Real estate sector in Spain suffered hard landing in '07

Real estate sector in Spain suffered  hard landing in '07

With sales slumping, prices faltering and property developers despondent, Spain's housing market evidently failed to get the soft landing in 2007 that the government and experts had predicted at the start of year.
Some experts are alarmist, some cautiously optimistic, but all agree that the sector is in crisis.
The issue is all the more important as the housing market makes up 7.5 percent of gross domestic product, according to figures from the BBVA bank. The construction industry as a whole employs 13 percent of workers.
And all this as Prime Minister Jose Luis Rodriguez Zapatero is seeking a second four-year mandate in March general elections.
"There is a crisis in Spain's housing market," said Jesus Garcia de Ponga, the head of Metrovacesa, one of Spain's leading real estate companies.
Property developers, some of whom are also suffering a lack of capital due to the international subprime lending crisis, have sounded the alarm.
The G14 group, which represents the country's largest developers, says 400,000 jobs will be lost within two years due to the construction slowdown.
Studies by the BBVA bank are more reassuring. "There is too much talk of disaster on this subject," said BBVA chief economist Jose Luis Escriva. BBVA continues to talk of a "soft landing" but still predicts 250,000 less workers in the construction industry next year.
But one thing is certain: sales are way down. In early December, the office that registers property transactions noted a 12 percent drop between January and October.
The decline accelerated throughout the year - 8.9 percent in the first quarter, 11.5 in the second and 16 in the third.
And when sales slump, prices follow. A recent study by Deutsche Bank forecast that the average rise in house prices in 2007 would be identical to inflation, which was around 4.0 percent in the 12 months to November.
This figure is far below that of recent years: 9.1 percent in 2006, 12.6 percent in 2005, and well over 150 percent for the period 1996-2006.
For 2008, Deutsche Bank predicts a drop in prices of 2 to 8 percent.

Updated : 2021-03-06 12:08 GMT+08:00