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Spanish property market slump continues

Spanish mortgage approval rates have fallen to their lowest point since the global economic crisis began

Just 42,117 mortgages were handed out in the country in March, official figures revealed this week.

This was down 4.3 per cent on the previous month, with the total value of the home loans awarded down 3.9 per cent.

The economic crisis has hammered the Spanish housebuilding industry.

Home loan volumes were almost 40 per cent lower in March 2012 than in the same month a year earlier. The number of monthly approvals has dropped by more than 75 per cent since January 2007.

There 39,650 mortgages for urban properties in March 2012 and just 2,467 in the ‘rustic’ category.

Andalucia received more than a fifth of the home loans given out, with Cataluna and the Comunidad de Madrid the next most successful regions.

Josh Miller, senior economist at the Royal Institution of Chartered Surveyors, warned that the bad times for housing designers in Spain were far from over.

‘The broad trend will remain negative at least over the course of this year, and most likely next,’ he said.

‘This comes on the back of deteriorating bank asset quality, falling house prices and rising unemployment.’

He said increasing unemployment and falling prices could see mortgage approvals halve over the rest of this year.

‘We wouldn’t be surprised if monthly mortgage approvals were running at close to 20,000 by year end and, if anything, the risks to this projection are skewed to the downside.’

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  • In the past foreign buyers getting into financial difficulties were quietly switched to interest-only mortgages which slashed monthly repayments for three to four years, he said. Spaniards who have got into difficulties have been allowed to stay in their home paying a rent rather than making mortgage payments. Developers, he said, that were technically bankrupt, were propped up so the banks did not have to own up to their bad debts.
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