Saturday, August 15, 2009

Spanish recession hits property sector

Some 400,000 Spanish companies hit by the recession have been forced to close during 2008, nearly 20% of them related to the construction industry, and causing a loss of 620,000 jobs and representing nearly 12% of the activity in this sector.

The only surprise is the speed with which this has happened, as the building sector was in full bloom until late in 2007, with heavy concentrations in popular tourist areas along the southern Mediterranean coast and Canary islands. With some 600,000 new dwellings coming onto the market annually, no-one paused to question whether demand would dry up. As a result many speculative new developments have failed to find buyers and lie half completed or empty.

Fortunately France has been able to weather the crisis, due to tradtionally cautious lending by the banks - loans are based on your ability to repay rather than the value of the property you are buying, and monthly repayments cannot exceed one-third of your disposable income. Although some projects have been put on hold, there is a continuing demand for new housing, based on projections over the next 15 years.