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%.