An annual report jointly published by Forcadell - a real estate company - and
the University of Barcelona, forecasts that Spanish property inflation will
fall from an annualised rate of 15% in the first half of the year to 8% by the
end of the year, and then drift into a 4 year period of stagnating prices
lasting until 2010. The report identifies the causes of the expected property
sector slow-down as a lower demand for properties (especially investments), an
increasing supply of properties, and a growing stock of unsold properties.
Meanwhile a new report on the Spanish real estate sector by Bayes Forecast finds
that only interest rates of 7% can put a stop to increasing Spanish property
prices, assuming no other external shock to the economy. Nevertheless this
study also forecasts a slowdown in price increases to around 5% or 6% from 2006
onwards, slightly above the expected rate of Spanish inflation (and therefore a
very limited level of real property price increases).
Also during September Caixa Catalunya - one of Spain's biggest savings banks,
and a regular author of forecasts on the property market - has forecast in its
half-year report on the Spanish economy that prices of newly built Spanish
property will increase by 16.2% in 2005, on a par with the average for 2003 and
2004, and slightly down on the 16.8% clocked up in the boom year of 2002. Caixa
Catalunya expects 708,000 housing starts in 2005, beating even the all time
record of 687,000 started in 2004, and much more than the 490,000 odd
properties started each year on since the mid-1990s. The report suggests that
the present level of building activity will cause imbalances that will have to
be faced at some time in the future. The report also expects the growth in
mortgage lending to fall from 21% in 2004 to 18.7% in 2005. In conclusion the
report expects Spanish real estate prices to continue increasing robustly in
the short term, whilst stating that such growth will be "difficult to maintain
for more than a few years".
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