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Spain’s house prices back to pre-boom levels

Posted on by peteradmin247

House prices in Spain are back to their 2004 levels as troubled Spanish banks are forced into heavy discounts to clear their balance sheets of unwanted property assets acquired from defaulting developers and hard-pressed owners.

During the decade to 2008, an easy credit boom sent prices of villas and apartments soaring in popular Costas where buyers were often able to sell-on their off-plan options for a profit. Everyone expected the boom to last forever…

From 2004 to 2008 alone, prices soared by 44%, despite the government’s firm grip on borrowing and spending. Speculators and buyers from Spain and around the world piled in and took out generous mortgages on offer from the banks to fuel multiple purchases.

It ground to a halt in the first quarter of 2008 as the property bubble burst and the Spanish economy plunged into a spiralling recession, leading to this week’s EU bail-out of the country’s battered banks.

Last month the Spanish Government confirmed an average price drop of 44% from peak 2008 to present after releasing much lower and confusing figures in previous years. That effectively cancelled out the boom years’ increases, returning prices to their 2004 levels.

Bank property specialists, PropertyinSpain.Net, who have been claiming for six months price discounts were averaging 43%, accepted the revised figure from the Spanish Housing Ministry and the new methodology of showing the price decline on a peak to present basis instead of previous “confusing” month on month or year on year comparisons.

A leading Spanish bank property chief said: “Prices in the boom years came from market demand and easy credit and we may now be back at the beginning of a price recovery, especially as we and other banks are still willing to provide mortgages even more generous than those of the boom years.”

With today’s realistic prices and 100% mortgage offers are generating bargain hunters and buy to let investors who seem happy with yields around 5.5% as the tourism market remains strong.

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