Spain’s house prices have seen their biggest quarterly drop since the country’s crisis began...
Prices fell by an average of 15.2 per cent in the third quarter of 2012 compared to the same period a year earlier, the National Statistics Institute (INE) reported yesterday.
With a lack of demand and shortage of credit in the recession-hit economy, prices have now fallen for 18 quarters in a row, with the drop accelerating since the start of 2011.
In September, an economy ministry official said the housing market was showing signs of flattening out. But the three quarterly figures so far this year – showing price drops of 12.6 per cent, 14.4 per cent and 15.2 per cent – seem to tell a different story.
A decade-long property boom drove the Spanish economy until 2008. But the ensuing collapse of the sector has contributed to a jobless rate of 25 per cent and house prices have fallen about 30 per cent since their peak.
“If they’re going to show the same kind of behaviour that US and UK house prices did, they’d have to fall another 20 or 25 per cent,” said Gayle Allard, of the IE Business School in Madrid. “But it looks like Spain’s bubble was bigger, so prices would have to fall even further than that.”
Toxic debts linked to property are blamed for dragging many of Spain’s banks into crisis. A new Nama-style bad bank will take on the burden of many of these assets.Regular readers know that implementing the Japanese Model and protecting bank book capital levels and banker bonuses has made the financial crisis worse in Spain.
Under the Japanese Model, the burden of the excess debt in the financial system was placed on the real economy. This has diverted capital needed for reinvestment and growth to debt service.
As a result, Spain's real economy is in a Japan-style economic slump. Only the situation is worse in Spain, because its government has been forced to adopt austerity policies. This has turned a slump into something much closer to a depression.