Spain: Still No Sign Of The Bottom

If you can afford a holiday home in Spain - and these days you do not need that much - the temptation to buy may be high: the British weather of recent days may be a deciding factor.

But the rain in Spain is not the same as over here. It comes in the form of economic decline and is more dangerous and longer lasting than Britain's spring showers.

Few will be seduced to buy a property in Spain now when the very high likelihood is that the same home will be even cheaper in one or perhaps two years' time. This is why:

- Spain now has 5.6m adults unemployed and sadly this is before the worst of the public sector job losses have been instigated - in other words, joblessness will worsen before it gets better, sinking sentiment and the housing market further;

- the government has announced it is to raise consumer taxes next year - the current domestic economic feel-bad actor will be a feel-worse factor in 2013, again deterring property sales;

- the latest estimate by credit rating agency Standard & Poor's is that the government's attempts to meet its deficient-reduction target (5.3 per cent of Spain's GDP, against 8.3 per cent now) will miss by a significnt margin. Therefore more cuts may well be necessary next year;

- the Madrid-based Credit Agricole Cheuvreux bank claims some £80 billion have been taken out of Spain in the past year by sovereign wealth funds and financial institutions. This is a sign they fear the economy will get worse, not better, in the near future.

Tragic as this is for the Spanish people and for Britons trying desperately to sell their homesover there, it does of course mean that those who want to buck the trend and buy a holiday hme in Spain have plenty of scope for bargaining. Most estate agents still operating on the Costas say 40 per cent drops from the 2006 highs are commonplace, although not always enough to tempt buyers.

With sentiment worsening (S&P lowered Spain's credit rating last week) it does appear obvious that if buyers wait a year or perhaps two, they may get even better bargains.

It is unfortunate but true: the Spanish downturn has some way to go.

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