[Mark Stücklin]

• Ratings agency Fitch forecast that Spanish house prices will bottom out in 2015, depending on how unemployment and mortgage lending evolve.
• “When house prices reach their lowest point, which we don’t expect to happen until the end of this year 2014, it’s probable they will have fallen 40% en nominal terms since the peak,” say Fitch.
• In a research note on house prics on the periphery of the Eurozone, the agency points out that the Spanish economy is growing again and unemployment falling, which will help support house prices in the long term.
• However, they point out that the market is still suffering from a large housing overhang, whilst demand is still limited by “high unemployment and the cost of credit,” along with “reduced real incomes”.
• Furthermore, they add that the fall in mortgage lending by 80% since the height of the boom in 2007 suggest that the shake out in house prices hasn’t run its course, despite the fact that the latest data from the INE for the month of March show a small increase of 2% in residential mortgage lending.
• They note that mortgage markets in peripheral Eurozone countries hardest hit by the crisis like Spain are showing the first signs of recovery in general terms, though the different countries are recovering at different speeds.
• Ireland, for example, are forecast to enjoy some growth in house prices after registering the biggest fall in the Eurozone, of almost 50% since 2007. The recovery is especially strong in urban centres like Dublin.
• Portugal, on the other hand, is a less optimistic story. It’s premature to talk of a stabilisation of house prices, given the low number of transactions and the continuing fragile state of the housing market and lack of credit. They warn that the prices could lurch down again.
• Italy and Greece show signs of economic recovery that will set the stage for some recovery in their housing markets.

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