Home sales in Spain dropped in May for the fourth month in a row according to official statistics that were just released. With the drop in sales, it is expected that prices will begin to show declines in coming months as well as lending policies are being tightened and consumer confidence in the market is ebbing.
Spain’s National Statistics Institute reports that house sales fell 34% in year-on-year numbers. Given that Spain has had one of the fastest growing real estate markets in Europe and the world this decade, the fall is coming as a shock to some and something to be expected by others. Some analysts predict that there could be price corrections by as much as 35% in some markets, and could continue into 2010.
Adding to the problems is a slew of unsold properties that have been built over the past several years and now stand unoccupied. While many of these new homes are located in the coastal areas, the problem is not just located in the prime resort areas but are also around the major cities such as Madrid.
The holiday and retirement sector dominated by northern European expatriates is particularly vulnerable, Standard & Poor’s said recently. “Large exposure to tourist and coastal developments also carries considerable risk because price trends in these areas tend to amplify cyclical ups and downs,” the ratings agency said.
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