Spain is set for a slump in its property market according to a new report from credit rating agency, Standard and Poor’s.
Following weak house sales in the second quarter this year - 11 per cent lower than in the first three months, Spain’s ten year construction boom appears to have run out of steam.
According to the report, Spanish house prices are around 20 percent overvalued and on the verge of a “protracted correction,” and Spain is now inevitably set for a prolonged slowdown in economic growth as construction activity slows.
In 2006, the construction sector accounted for around 12.6 per cent of the country’s total employment, compared with an average of 8.2 per cent across the rest of Europe. These figures are a stark contrast to the unemployment statistics for the past 12 months which have seen unemployment within the construction sector rise by 53 per cent.
The result of which is a long anticipated downturn in the market with the worst hit areas being the larger cities and the coastal regions of Costa Blanca and Costa del Sol, where more than 250,000 homes are British-owned.
The Organisation for Economic Co-operation and Development announced earlier this year that Spain’s property market would see: "an abrupt adjustment in which prices will plunge" in 2007 thanks to the over inflated house prices. The Spanish Government has also backed this up. During an announcement last month, Pedro Solbes, the Finance Minister for Spain said: "We face a period of uncertainty and lack of clarity. This is always bad for the economy."
Over the last decade, regions of coastal Spain have undergone vast redevelopment fuelling the construction boom that saw some 800,000 homes built in 2006 alone – more than in Britain, France and Germany combined.
However, what goes up must come down and despite Spanish house prices increasing by more than 200 per cent during the last decade, the second quarter of this year saw them dip below the rate of inflation for the first time over the same period.
The property boom has brought with it a large number of foreign property investors, many of them British, who now risk substantial loses on the value of their property if they decide to sell now. Spain properties
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