Are we paying too much for our housing?
March 6, 2008
Housing in Spain is overvalued by 40%, according to a study carried out by the “Observatorio de Coyuntura Económica del Instituto Juan de Mariana”. Spain comes second in this ranking after Monaco!
The boom has forced households to take out increasingly bigger mortgages, with an accompanying rise in debt levels. The rise has resulted especially from the extreme reduction in interest rates of the last 10 years. Spanish banks are heavily exposed to the mortgage market.
In May last year, the five largest property stocks lost 20% of their value, tugging the whole Ibex downward 5% in the process.
A further concern is the knock-on effect that a property market crash will have on the banking and construction sectors, which between them account for more than a quarter of the Spanish economy.
House building accounts for nearly 50% of income for Spanish contractors and the building industry alone employs two million people. The construction sector has been one of the country’s motors of expansion.
(C) Copyright Photo: greenacre8
Written by Sophie · Filed Under Business
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