Spain house prices slip for 12th quarter running

 

Spanish house prices fell for the 12th consecutive quarter in the last 3 months of 2010, but came close to break-even as the property market struggles to emerge from an extended slump.

In the October to December period prices fell 0.1% quarter on quarter, national statistics institute INE said on Tuesday.

That was the smallest drop since quarterly prices began to descend in the 4th quarter of 2007 and much less than the 2.2% decline registered in July-September 2010.

However, official data underestimates the weakness of the market and final sale prices, rather than valuation prices used by INE, may have fallen much more sharply, economist at Global Insight Raj Badiani said.

"Despite recent indicators suggesting that the rate of decline in housing activity has been stabilising, the fundamentals point to weak activity across the sector," Badiani said. "This is a concern for the household economy, given that housing equity constitutes around 90 percent of total household wealth."

Spain's real estate market began to implode at the beginning of 2008 as the global financial crisis squeezed banks, putting an end to easy mortgage credits.

House prices have dropped around 17% since their peak, according to the Bank of Spain, less than other hard-hit housing markets such as Ireland, and economists have said Spanish real estate should continue to decline into next year.

The housing slump has battered Spain's economy, sending millions of low-skilled builders onto the swelling unemployment lines and denting consumer confidence which in turn has damaged the vital service sector.

Prices may also be held artificially high by large portfolios of repossessed properties held by the banking sector which has been holding on to the assets while waiting for the market to improve.

The Bank of Spain estimates there is excess stock of as much as 1 million unsold homes in the country, an overhang which threatens to lead to a prolonged downturn as the banks unload their hoarded properties in an effort to shore up reserves.

House prices fell 1.9% year on year in the fourth quarter, less sharply than the 2.2% fall of the previous quarter, INE said.

Spanish house sales rose by 19.6% in January year-on-year after falling by 1.7% in December, INE said on Monday, the first rise after 4 consecutive monthly falls.