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One of the most erudite analysts is Professor Michael Ball of Reading University and the author of The European Housing Review. In the 2005 edition there was an interesting chapter on the second home market and in particular the economic fundamentals which drive this market and how it differs from the principal home market.
In a principal home market where there is a normal supply environment any downturn in house prices increases affordability and therefore when rental payments exceed mortgage payments, those renting are induced into purchase. This provides the market with a soft landing and an assured recovery. Only when you have an outright catastrophe or mass unemployment do you have a market crash, and even if this does happen it tends to be very regional.
In a second home market there is no such fall back group and so when prices start to fall as they have no technical or fundamental support they are vulnerable to an outright crash. If you oversupply the market with the wrong type of housing in the wrong areas then you exacerbate this problem. Unfortunately this is what has happened in Spain.
It is important not to generalise as the property market is highly complex and tends to be made up from many micro-markets each with their own strengths and weaknesses. Indeed large businesses and extraordinary events in an area can have exceptional results. For example the building of a new airport, or the introduction of a new industry.
No honest or rational person with the knowledge and experience I now have could ever consider encouraging any individual to purchase residential property in Spain today. I forecast a drop of up to 70% in the worst affected areas, and as Spain is so heavily dependent upon the construction sector, the entire country is going to be affected in one way or another. This downturn will also spread to other countries. For example in Portugal, Spanish investors are being forced to sell investments they made because they cannot afford to pay the banks in either Spain or in Portugal. I cannot over emphasise how serious this problem is.