House Prices Rising in Spain
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Interesting article in the Financial Times, pointing to better times ahead.


Spanish house prices are rising for the first time in more than six years, suggesting that the country’s nascent economic recovery is gaining traction even in sectors that were hit hardest by the recent crisis.

House prices in the second quarter rose 0.8 per cent compared with the same period last year, the national statistics office said on Monday. It was the first year-on-year increase since the first quarter of 2008, which marked the end of a decade-long housing boom and provided the trigger for Spain’s subsequent housing bust, banking crisis and sharp rise in unemployment.


The turnround in Spain’s housing market, if confirmed in the months ahead, would provide yet another sign that the economy is now firmly on the mend – and would vindicate the recent surge in foreign investment heading into Spain’s real estate market.

Antonio Garcia Pascual, chief euro area economist at Barclays, said the rise in house prices reflected broader trends in the Spanish economy, with the main driver of the recovery shifting from exports to the domestic economy: “Unemployment has been coming down for some quarters, disposable incomes are rising and bank lending is less of an obstacle than it was – so it is only natural that asset prices move along with that improvement.”

A rise in house prices could provide a further boost to the domestic recovery, he argued, pointing out that property is by far the main source of wealth for Spanish families. But Mr Garcia Pascual also warned against over-optimism: “I don’t think you will see a rapid rebound, simply because there is so much supply. You are talking about hundreds of thousands of empty apartments. This will take time.”

The second-quarter increase comes after one of the most dramatic property boom-and-busts experienced by any European country during the crisis: at the high point of the recent cycle, in 2006, the construction sector made up more than 13 per cent of national output, and Spain boasted more housing starts than Germany, France, Britain and Italy combined. Since then, house prices have fallen by more 35 per cent across the nation, and about 1.7m workers in the construction industry lost their jobs.


Spain emerged from recession last year, and the economy has recently shown signs of accelerating faster than most analysts expected. National output in the three months to June rose 0.6 per cent compared with the first quarter this year – one of the biggest leaps in the eurozone. The Bank of Spain currently predicts that the country’s gross domestic product will rise 1.3 per cent this year and 2 per cent next year.

On Monday, the Organisation for Economic Co-Operation and Development praised Spain’s economic recovery in a new report. Angel Gurría, the OECD secretary-general, said in a statement: “The economy is growing again, employment is rising, the banking sector has stabilised and financial markets’ trust in Spain has increased.”

The Paris-based group urged further reforms, however, especially to help Spain’s 5.6m unemployed back into work.


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