Spanish property slump set to claim Irish victims

Fears that a Spanish property bust could claim thousands of Irish victims were raised today following a massive slump in the country’s real estate market.

Panic selling of shares in Spanish property firms on Monday signalled an end to the over-inflated housing boom, with price falls a real possibility, experts said.

Spain has continued to remain a popular destination for Irish overseas property buyers, many of whom have benefited from price rises over the last decade.

But economists warned that the housing market in Spain is about implode.

They said: “The country is over-housed, households are over-indebted and the construction industry continues to churn out homes.”

Low interest rates in Europe have fuelled the property market in Spain in recent years, but a slowdown is now deemed to be inevitable by market watchers, amid fears of a significant correction in the Spanish economy.

Leading construction companies listed on Madrid’s IBEX index took a hit yesterday as investors offloaded shares in anticipation of the slump.

The index closed down 2.7%, with banks, exposed to the mortgage market, following property firms into the red.

High levels of construction have seen Spain become the best housed nation in Europe, and figures show they have the debt to show for it.

Household debt has risen to 133% of disposable income, up from 75% in the late 1990s – sparking fears of a mortgage crises.

Diana Choyleva, director and chief economist at Lombard Street Research, said holiday home owners who flocked to Spain over the last couple of years could now see the price of their investment fall.

She added: “This is not good news for foreign investors in Spain. The problem is in supply. We have had over investment on a gigantic scale and it has already started a slowdown in house price growth.

“We will definitely see house price growth stop and falls in nominal prices are likely in Spain over the next 12 to 18 months.”