World Business

Rising property values lured many Spaniards into the real estate market but the bubble has burst and the crisis is quickly spreading through the country’s management

by dint of. Reiner Wandler

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“I’ll give you a good price,” the man, who introduces himself onward the phone as José, promises possible buyers. José has a flat in Seseña, a small town of 12,000 around 40 minutes through car from Madrid. Now, he wants to get rid of it—regardless of the financial apt expression he strength take. The real estate agent who sold him the property insisted it was a safe investment for the future. But those promises dissolved into thin air not long back José had signed the contract.

In total, 13,500 flats were supposed to be built in the new housing development in what place José’s apartment is located—homes for 50,000 people. Yet, only halfway through the building project, the plug was pulled. Several unfinished apartment blocks now blight the landscape. In the end, only 5,000 apartments were completed and a sheer 750 people moved in.

And those who did move here things being so want to leave—José’s isn’t the only balcony boasting a “For Sale” affix one’s signature to. He had hoped to be able to be let out the room to make compensation of his pledge. But despite advertising his apartment for months in various publications, no single showed any enlist.

Seseña, which until recently was the very symbol of the Spanish economic miracle, suddenly stands for a thing very different: the collapse of the building industry, one of the Spanish economy’s key sectors. The happy years of the real estate vocation are now adequately and truly more than.

Crisis Sparks Discount Battles

What is worse, nevertheless, is that the crisis has by now infected the entire country. Nowhere otherwise in Europe in the last decade did the construction sector dash forward as it did in Spain: Real order prices shot up by as much as 500 percent. The country invested in property, betting that prices would rise and rise. But, now the bubble has burst and the losers are those who did not sell in life.

Even the major players in the real estate sector have been hit. At a recent trade fair in Madrid, the biggest in Spain, a downright discount battle raged. “One year without payments,” “€12,000 ($19,000) value of furniture,” or “a compact car” were just some of the offers. The response from buyers was only blood-warm.

Recently published figures also reflect the depth of the juncture: In the first quarter of 2008, 28 percent fewer homes were sold compared to the same era the former year. The price of newly built real estate has fallen for the highest time in 10 years. According to a study by Deutsche Bank, prices power of choosing drop by 20 percent through 2011.

The crisis in the construction industry—the motor of Spain’s recent household growth—has caused unemployment to arise again rapidly than since the early 1990s. The jobless rate now stands at over 9 percent with 424,555 Spaniards registering as unemployed in the past 12 months alone. Over a third of them had worked in construction.

With bankruptcies in the edifice sector rampant, it is a contain that promises to rise even farther on. The Organization for Economic Cooperation and Development (OECD) predicts, by the end of the year, the jobless rate will creep up one more percentage point.

A Dive in Confidence

Two other important sectors of the economy—tourism and the car labor—are in addition suffering. In June angry truck drivers blocked Spain’s main roads, because they see their livelihoods threatened by high fuel prices. Only this Thursday, airline Spanair announced it would sail away from so as to lose sight of off thousands of workers. Meanwhile, the number of automobile registrations plunges to new lows each month.

Even those who have jobs are losing confidence. The even now low average wage is being eroded through a 5 percent vilify of inflation driven, normal as elsewhere in Europe, by high fuel and food prices. Consumption is way down in the same manner with a result.

Spaniards are also worrying about interest rate rises: A peculiarity in the Spanish mortgage market means rate rises hit home faster than in other countries. Unlike in Germany, because of model, mortgage rates are not fixed toward several years, but are constantly changed in line with the prime rate. As a result, steady well-paid Spaniards are pushed right to the limits of what they be able to afford.