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Spanish Government Shows Confidence in Real Estate Market - 29 October 2009

Despite reports about defaulting tenants and unpaid rentals in Spain, government officials say that the best time to invest in Spanish property is now.

At a recent press conference, the Spain’s Ministry of Housing confirmed that the worst of the real estate price falls are over and the pace of decline has slowed over the last few months.
However, other economic forecasters disagree. Prices increased 288 percent during the housing boom from 1997 to 2007 with the value of Spain’s housing stock reaching 5.3 trillion Euros. Since then, houses and land prices have only dropped 15 percent, urban land by 21 percent and other Spanish lands by 25 percent. For the market to balance out, houses must fall another 22 percent, urban land 53 percent and other lands 62 percent within the next two to three years. Prices have only dropped 8 percent in the last 12 months.

However, the recent slowdown of land development is positive sign in restoring market balance. This year planning approvals for new developments have fallen from 600,000 to 100,000. Developers who overpaid during the peak, when homes were overvalued by 37 percent, are being forced to turn over their properties to the bank, evening out the numbers between construction and demand.

Lower interest rates, thanks to the fall of the Euribor (Euro Interbank Offered Rate), has also led to more interest from buyers. Overseas investors from the UK and other European countries continually list Spain as one of their favorite destinations for potential investments.

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