House price declines accelerate in Spain
My translation below is of an article from the website Finanzas.
House prices accelerated their decline in June, down 10.1% over the same month of 2008, which is three tenths more than the previous month, when housing fell 9.8%, according to an Index of Spanish real estate market (IMIE) from Tinsa.
This fall, which is typical at the beginning of the year, adds to those ongoing since December 2007, a date from which the cumulative decline in the price of housing is 13%.
The IMIE shows further that this past June two of the five regional sub-indices showed decreases greater than the overall average.
Thus, house prices in the Mediterranean coast fell by 12.3%, while in the capitals and big cities, it fell by 10.5%. Still, in metropolitan areas the price of real estate declined by 9.9%, below the 10.1%.
Cumulative decline of 17.7% in coastal housing
For their part, house prices fell by 9.3% in the case of the Balearic and Canary islands, while the drop was 9.8% in the category of the remaining municipalities.
Based on the cumulative decline from the peaks of each subs-index, the Mediterranean coast, with a correction of 17.7%, and the capitals and major cities, reaching 14.3%, and the municipalities of metropolitan areas, with a fall of 13.6%, stand out.
What you should notice here is that the decline in house prices in Spain is much less than the declines we have witnessed to date in Britain or the United States. Some might see this as a positive sign regarding the Spanish economy. However, given the huge run-up in prices during the boom, I see this as a warning that declines in prices have much further to go in Spain. The resulting losses will be catastrophic for the savings banks in the region. Therefore, developmentsregarding Spanish house prices bear watching, in particular because the ECB had been instrumental in providing liquidity to the savings banks (debt owed by Spanish banks to the ECB hit a new record in June above €70 billion – see Spanish-language article here). I suspect this liquidity is no longer on offer and that means the cost of larger problems in the banking sector will fall on Spanish taxpayers.