Reply To: Spain, Ireland and threats to the property boom


From yesterday’s Irish Indo:

“Spanish property slump fears grow
Wednesday March 21st 2007

IRISH holidaymakers who have invested in the Spanish property market could be in for a shock following concerns that it could face a slump worse than that in the US.

The fears are based on the loan terms banks are imposing on developers. According to data compiled by Bloomberg, property magnate Fernando Martin, the former Real Madrid soccer chairman, and Barcelona-based Promociones Habitat are paying five times more to borrow than US developers.

Analysts said that banks are imposing terms on property firms similar to those for defaulted loans.

Madrid-based RR de Acuna & Associates said that estate agents in Spain are expected to cut the prices of holiday homes by as much as 10pc this year. The company values property for about 40pc of Spanish mortgages.

Analysts have also said that a slowdown in Spain may have a “psychological” effect throughout Europe.

Spanish house prices averaged €276,300 in December – twice as expensive as in 2000 and beating growth rates in Ireland and Britain, according to figures from Irish Life & Permanent and the European Mortgage Federation.

Irish, British and German holidaymakers fuelled sales of four million homes to foreigners, according to the Vacation Homes Agency, an organisation in Madrid funded by developers.

Construction made Spain the biggest driver of economic growth in the euro region this decade.

Property spending by foreigners dropped 11pc during 2006 to €4.9bn, according to Bank of Spain figures released last week. New mortgages sold to Spanish families fell by 10pc.

The Organisation for Economic Co-operation and Development said earlier this year that house prices in Spain may be overvalued by as much as 30pc.

A sudden acceleration in interest rates could cause an “abrupt adjustment in which prices would plunge”, the Paris-based OECD added.

ReMax International, the second-biggest US estate agent, said it cut prices as much as 26pc on more than 5,000 homes in Spain in January. A slump may also hurt Spanish banks. Santander Central Hispano and Banco Bilbao Vizcaya Argentaria lead banks owed €1.3 trillion by developers, builders and mortgage holders. (Additional reporting Bloomberg)

Ailish O’Hora”

The danger of mewing the family home to invest in Spain/Florida could come back to bite Irish holiday home buyers over the next few years!!