Bank of Spain warns on House Prices

The governor of the Bank of Spain warned yesterday that Spain’s economic growth might be stopped for awhile due to a decrease in house prices.

According to Jaime Caruana, the bank’s governor: “When the high rates of high prices will still continue, there is a huge possibility that the country’s economic growth will be stopped abruptly or disconnected.” He said again that according to the European Central Bank’s claim that Spanish properties are 24 and 35 percent overpriced. He also added that the household debts had doubled to 100 percent since the mid-1990’s. “The Spanish properties, and also with the households, are now more prone to various developments, especially to a gross increase in interest rates.”

But still with house prices dipping down, the risk to banks was still minimal because default rates are now very low and there is ease with the banks’ solvency problems. This is also due to the buoyant consumer spending and construction industry of the country’s 12 years of economic growth.

Homes Demand Still Exceeds Supply

And even with this problem besetting the country right now, the governor said that there are still a demand for a new home, which surprisingly, exceeds supply and with the 2.25 percent, the key euro interest zone is still at its lowest, whereas last December, it was 3.8 percent but it is “expected to increase again this year.”

According to Mortgages In Spain Alberto Linares: “The quality of houses will still push through and with these homes, the demand is still unbreakable and the specification with Spanish apartments and villas and for the Spanish lifestyle which is still in demand by so many foreigners willing to buy a property here. The cost of buying a property here in Spain is relatively zero when inflation is considered.”

Posted on: Spain

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Bank of Spain warns on House Prices

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