The Spanish government would have us believe that Spanish property prices are still rising by 0.7%, but according to 2 new reports from UBS and Credit Suisse – 2 leading Swiss banks – Spanish property prices are already on the way down, and have a lot further to fall.

“We estimate that there will be a significant reduction of 30% in real terms in the next few years,” says the report by Credit Suisse. UBS estimates a similar fall in property prices, and says that the market will take until 2011 to “absorb the oversupply of close to 1 million homes.” UBS argues that price falls of around 30% are the only way stimulate demand against a background of rising unemployment.

Credit Suisse argues that actual transaction prices are well below the levels implied by the official statistics, and that prices will continue to fall because of the “over-valued market, rising unemployment, and tough financial conditions.”

UBS forecasts that Spain will suffer a recession until the middle of 2010, causing unemployment to rise towards 4 million, or 16% of the active population. “The crisis in Spain will be longer and deeper than the rest,” says Roberto Ruiz-Scholter, strategy director of UBS private banking in Spain. UBS forecasts that the rest of Europe will come out of recession by the middle of 2009.