The credit crunch and lack of mortgage financing is still the single biggest problem for the Spanish property market, argues Marifé Esteso, President of the API real estate association in Alicante province, home to the Costa Blanca. The other big problem is excessive asking prices, making the average property still unaffordable, despite recent price declines.
“The scenario hasn’t changed at all, and what is worse is that banks and cajas (savings banks) are still not extending credit, and under those circumstances it’s impossible to reactivate the market,” says Marifé Esteso, quoted in the Spanish press. Esteso calls on the government to pressurise banks to use some of the bail-out funds they have received to start lending again.
To add to the gloom Esteso says her association can see no end to a market funk that has already been going on for 2 years. “We started to notice it at the start of 2007 and we are still not optimistic because of the lack of liquidity. Right now there are even lots of cases of buyers who can’t afford to pay the mortgage and have to hand back the keys to the bank, which means they are also losing income.”
If the credit crunch is the root problem, then there will be no improvement in the housing market until credit starts to flow again. As a result, eliminating mortgage relief – the recent measure announced by Luis Rodríguez Zapatero, Spain’s Socialist Prime Minister, to stimulate the Spanish property market – will do very little, if anything, to get the property market going again.
The voices criticising Zapatero’s initiative as ineffective or even counterproductive are increasing. “Eliminating mortgage relief from 2011 onwards is a mistake,” says a notary in Benidorm, quoted in the Spanish press. “It won’t help to sell the stock of unsold property, and is bad news for the middle classes. All it will do is paralyse the market even more than it is already.”