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Spanish property sales down

Jude Buttle

The sales of Spanish homes dropped heavily in June, reinforcing concerns over the market, with experts predicting further decline in 2009.

The Economy Ministry's National Statistics Institute reported that house sales plunged 29.6% in June from a year earlier, after a 34.3% decrease in May.

Properties in Spain have been one of the prime locations for purchases in Europe, but oversupply, a period of high mortgage rates and the impact from the credit squeeze in the US, has seen house prices fall for the first time in a decade this year.

"House sales have fallen on a month-on-month basis since the beginning of last year, when the indicator began, and this is just the start," said Merrill Lynch economist Daniel Antonucci. He added: "We expect data to continue to worsen well in to next year."

Spanish banks have also been hit, with mortgage lending falling to 40.6% in June, following a 40.4% drop in May.

Analysts expect the decrease in sales and mortgage figures to soon have a bigger affect on house prices, with some predicting as much as 30% depreciation in average property values over the next few years, as they foresee the country going into a recession.

"We're not seeing prices fall as sharply in Spain as in the UK, but that is because the promoters are in no hurry to sell in the current market. But, the fall is inevitable and will be hard," said economist for Ibersecurities, Juan Rodriguez Rey.