Spanish property crash concerns on the rise

26 April 2007
British property-buyers looking for a place in the sun are being warned to think hard before rushing to buy a house in Spain.

The classic European hotspot for second-home buyers and retirees could be facing a drastic property boom downturn, experts have warned.

Mary Somerset-Webb from MoneyWeek magazine told BBC Radio 4's Today programme that prices will begin to fall soon, and could plummet by as much as ten to 15 per cent before stabilising.

"House prices have risen enormously over the last few years," she explained, creating a situation where prices are now "rather too high based on affordability levels" in Spain.

Supply, she commented, was beginning to outstrip demand for new-build housing in the country as construction companies kept feeding the seemingly insatiable demand from overseas buyers and new immigrants.

But this week, shares in several Spanish and London-based construction companies and banks began to look unstable, with share prices for Valencia regional developer Astroc falling 62 per cent last week.

According to Spanish Property Insight, Britons buy approximately 40 per cent of the new homes built in Spain every year.

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