Reply To: Spanish Property Market in 2007

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Anonymous
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Property, no matter where, only declines where 3 conditions are met out of the 4 below:

1. A recession, forcing lower wages (or increases in wages) AND large increases in unemployment, causing very poor consumer confidence.

2. Property bought with very high proportion of mortgage debt. (95% – 100%+)

3. In tandem with the above rapidly rising interest rates to very high levels

4. Massive oversupply of property.

In the USA at the moment (where property is declining) 2, 3 and 4 are in place.

In the UK (slow, stable growth) 2 is in place.

In Spain only 4 is in place. For a dramatic decline to take place I reckon interest rates would have to hit 7%, AND a recession would have to emerge across most of europe.

For prices to fall a certain proportion of owners have to be ‘forced’ to sell because of unemployment and/or unaffordability of the mortgage.

I would say the conditions are nowhere near bad enough to cause a decline. After all, all those cranes are there because people have paid deposits and stage payments.

CDS should expect changes in prices of between -10% and +10% over the next year or so. Some of the cr@ppy places may fall by 20%. Some of the lovely places may rise by 20%.