- Title: SPAIN: Collapse in the property market sparks slowdown in Spain's economy
- Date: 16th April 2008
- Summary: (EU) MADRID, SPAIN (APRIL 15, 2008) (REUTERS) BIG CONSTRUCTION SITE MIGRANT CONSTRUCTION EMPLOYEES WORKING CONSTRUCTION MANAGER ENTERING OFFICE STAND SIGN AT DOOR READING: "WE ARE NOT HIRING" VARIOUS OF JOBLESS ROMANIAN CONSTRUCTION WORK SEEKERS (2 SHOTS)
- Reuters ID: LVA2SXBYYSR8KGFTI5T188N8HKF
- Location: Spain
- Country: Spain
- Duration: 00:00:28
- Topics: Industry
- Story Text: Builders in Spain are tempting cagey home buyers with free cars, mortgage holidays and hard cash as they try to lift the gloom shrouding the crisis-hit housing sector.
Over the last two decades Spain experienced amazing financial growth fuelled by a booming housing market evident in the Costa del Sol and virtually elsewhere in the country. But now, the sun is finally setting on the economy.
The slowdown started in mid-2007 in Spain's grossly over-supplied coastal market and spread across the country. Sales of seaside apartments plunged over a third in the last six months.
Spain's economy has slowed down sharply in 2008 as the housing boom runs out of steam, the Bank of Spain's head of research said in a recent property conference in Madrid.
"Many are the eyes set on the role the housing sector is set to play in the bigger picture of the Spanish economy. After representing for a long period the motor of our economy, the housing sector is now, undoubtedly, the main factor behind the downturn in which the Spanish economy is already into," said Jose Luis Malo de Molina.
A collapse in the property market sparked a slowdown in Spain's economy, affecting wide-ranging sectors from construction to manufacturing to banking.
Construction is almost at a halt in many sites in major cities like Madrid or Barcelona.
Spain has built over 5 million new homes in the past decade, taking the stock to 24 million, thanks to economic growth averaging 3.8 percent, historically low interest rates, and an influx of immigrants to cities and foreigners to the coastal regions.
Mortgage payments have become less and less affordable and Spain's looming economy and financial crisis has not made life easy for the average man.
"Mortgages are clearly increasing. They used to get cheaper, but now they are getting very expensive -my mortgage is the same it was 12 years ago but my salary is has failed to keep pace with it. On top of it, I have the same problem all Spaniards have now, 50 euro at the supermarket only buy coca-cola," said Mar, an employee at Spain's Energy Group Gas Natural.
Construction has been the catalyst of Spain's economy and accounts for almost 20 percent of GDP. But the global credit crunch -- which the IMF says could more than halve Spain's growth rate to 1.8 percent -- may curb lending to a fast-cooling housing market.
Spanish builders are tempting cagey home buyers with free cars, mortgage holidays and hard cash as they try to lift the gloom shrouding the crisis-hit housing sector. Some are also diving into the rental market.
At last week's annual property fair in Madrid, the number of promoters was down by a third on the previous year -- many of them victims of the deepening housing crisis. With fewer buyers milling between models of white-washed housing estates, there were scant queues to see sales representatives.
Amid dozens of offers in the aircraft-hangar sized halls of Madrid's Salon Inmobiliaro property fair, the Habitat Real Estate group was offering leasing options and marking down property prices.
"We are offering important discounts. Today, we believe, price is a very important factor in this market -therefore we are offering up to 50.000 euros for buying a house," said Marketing Director Laura Argente.
But prices are still out of reach for many. With a 100-square metre city flat costing about 300,000 euros ($474,600) in Spain and average wages at just over 2,000 euros a month, huge numbers of people, particularly the young, have been priced out of the market.
Carmen Gil, a 29-year-old midwife from Madrid looking for a flat, said that the situation was even worse for single people.
"I don't think it is a bad idea because right now there is fear in the air and that is lowering prices, owners are selling cheaper. I think this situation will continue until the end of the year, so I'm going to take advantage," she said adding that state-sponsored apartments was her only option.
But with the burst of the housing bubble tens of thousands of jobs are being lost too.
The number of unemployed immigrants in Spain rose by a quarter in 2007 from a year earlier, according to government figures.
Unemployment among immigrants working in construction rose by over a half in the same period. Spain has absorbed more than 3 million foreigners from places as diverse as Romania, Morocco, and South America.
In Madrid, a group of Romanians who declined to be identified, explained that for the last three years they have worked in the booming construction sector but that now they were jobless. The construction site where they were seeking employment had a sign reading "We are not hiring" hanging from the office door.
Spain is one of the hardest-hit markets in Europe alongside Ireland, where prices have tumbled 8.8 percent in a year, and Britain, where prices fell 2.5 percent over March, according to mortgage lender, the Halifax.
- Copyright Holder: REUTERS
- Copyright Notice: (c) Copyright Thomson Reuters 2011. Open For Restrictions - http://about.reuters.com/fulllegal.asp
- Embargoed:1st May 2008 13:00
- Usage Terms/Restrictions: None