Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Dow Short-term Trend Analysis - Coronavirus Trigger a Stocks Bear Market? - 24th Feb 20
Sustained Silver Rally Coming? - 24th Feb 20
Should Investors Worry about Repo Market and Buy Gold? - 24th Feb 20
Are FANG Technology Stocks Setting Up For A Market Crash? - 24th Feb 20
Gold Above $1,600 Amid FOMC Minutes and Coronavirus Impact - 24th Feb 20
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

A Warning from Spain About the House Price Crash

Housing-Market / Spain Jul 23, 2009 - 06:06 AM GMT

By: MoneyWeek


Best Financial Markets Analysis ArticleDavid Stevenson writes: Almost every day, it seems, someone else wants to tell us the housing market's picking up.

On Tuesday, even the taxman had a go. Apparently the number of British homes sold (for more than £40,000) was up 15% in June compared with May.

That followed Monday's upbeat message from property website Rightmove that house prices are bottoming out.
Don't believe it. If you want a glimpse of just how badly things can go wrong, take a look at what's going on in Spain...

Spain's house price crash is worse than it looks

Right now there's clearly some 'statistical noise' in the housing market. After a sharp fall, prices stabilise for a while, which can give the impression there's a pick up underway. But anyone feeling like buying a house right now should take a look at what's happening in Spain.

Why? On the surface, the Spanish property scene doesn't look too bad. Ministry of Housing figures show just an 8.5% drop over the last 12 months from the mid-2008 peak. That's not so bad, given that Spanish house prices more than doubled over the previous 10 years. But the official stats are a long way from telling the whole tale.

The independent house price index compiler Tinsa reckons average prices are 13% off the top, and down 18% on the coast. But the word from developers and estate agents is of falls of up to 30%.

When you look at the earlier building boom, this is no surprise. Between 2001 and 2007 Spain went mad. The country put up 29% of new EU homes despite having just 9% of the population. The end result has been a glut of 1.5m unsold homes.

That sounds like a recipe for disaster – which of course, it is. Now that the housing bubble has burst, home sales have plunged by more than a third in the 12 months to May. Shedloads of developers have gone bust, owing billions to the banks. And said banks are now being forced into taking on rows of empty houses no one else wants.

Spain's new boom industry - bank robbery

Hence the next problem. With the number of properties for rent soaring by 55% over the past two years to 3.3m, the highest since Ministry of Housing data started, rents in cities have begun dropping for the first time in seven years - by up to 8% so far. "Those who need to sell but can't are being forced to lease" their old house, Fernando Encinar at, Spain's largest property website, tells Bloomberg. "We haven't seen this number of properties for rent since the 1950s".

Rents can only fall further, which will depress prices even more. The jobless rate, at 19%, is the highest in the EU and is set to climb even higher, which will only add more forced sellers.

And here's the extra scary bit – the recession is resulting in a very definite rise in crime. Bank robberies are up by 20% within the last two years. "People are committing offences through necessity, first-time offenders who can no longer continue to maintain their lifestyles and so turn to crime", says the head of criminology at Camilo Jose Cela University, Francisco Perez Alba, to the New York Times. As Jose Manuel Murcia of the Workers Commission union federation puts it, "Banks are denying credit. People can't pay their mortgages. There's unemployment, hunger - and there's money in the banks… so it's logical to rob a bank".

British house prices are set to fall further too

OK, this may be extreme. And it seems a long way from Britain's situation right now. For one thing, we don't have Spain's huge level of surplus property.
But rents over here are falling too, while the supply of rental property has shot up, according to data from And while Britain's unemployment rate is only 7.6% at the moment, the dole queues are bound to get longer. That will mean lots more forced – and desperate - sellers.

That's painful for the people involved, but it's not necessarily a bad thing. As we recently pointed out in Money Morning (House prices could fall another 40% from here), one of the main UK housing problems is affordability – or the lack of it. Prices are still way above levels where the market can rebuild from.

The Nationwide Building Society's first-time buyer affordability index, which gauges initial home loan payments as a percentage of take-home pay, is still miles away from a market trough if the last housing downturn is any guide.

So prices have to fall further so that new buyers can get on board. But that means that current buyers are likely to see the value of their purchase fall substantially before it bottoms out. That's bad news for anyone who's been persuaded to act as guarantor for someone else's home loan, for example - the

Council of Mortgage Lenders recently reported that in the past two years the percentage of first-time buyers being helped by their parents to put together a deposit has doubled to a staggering 80%.

Of course, not everyone thinks that things will get this bad. And for this week's issue (out tomorrow), we gathered a range of experts from across the property market, put them in a room together, and watched the bulls and the bears and the in-betweens slug it out. It's our first property roundtable since June 2008 (you can read that one here) and we think you'll find it very informative.

By David Stevenson for Money Morning , the free daily investment email from MoneyWeek magazine .

© 2009 Copyright Money Week - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Money Week Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules