IRISH owners of an estimated
75,000 Spanish properties will
be anxiously reviewing stock
valuations after Spain’s real
estate companies were shook to
their foundations yesterday
and almost €1.5bn was wiped
from the value of Irish
shares.
Bank of Spain governor Miguel
Angel Fernandez Ordonez
attempted to reassure
financial markets, however,
describing the situation as
only a gradual cooling off of
the Spanish property boom.
Yesterday’s market fall was
triggered by a meltdown in the
share value of property firm
Astroc, one of Spain’s most
hyped companies.
Spain had been immersed in a
building bonanza since the
mid-1990s and many property
companies on the Madrid stock
exchange saw their value
phenomenally double over the
past year alone. But a
saturated property market and
rising interest rates are
expected to slow Spanish house
price growth to between 3% and
5% by the end of the year,
from a high of 18.5% in late
2003. The sudden decline has
in some cases been highly
dramatic, with share in one
Spanish real estate company
falling by 60% this week.
“This is the burst of the
Spanish real-estate bubble,”
said Alberto Espelosin, a
strategist at Zaragoza,
Spain-based Ibercaja Gestion,
which manages about €5bn in
property. “Banks are exposed
and have risk,” he said.
Overseas property consultant
Diarmaid Condon said he did
not believe the impact on the
Irish market would be
sizeable, as Irish buyers
usually opted for coastal
areas where, unlike the
cities, property prices have
been weak for some time. Many
Spanish property development
companies are stock exchange
listed, and, during any
general decline in stock
values, the property market
takes a hit also, not only in
Ireland but across European
markets. Mr Condon’s advice to
buyers of Spanish property had
always been to be wary. The
best reason for investing in
Spanish property should be
lifestyle rather than a
speculative move.
The Spanish market had been
accelerating at a phenomenal
rate, and some form of slow
down was inevitable, he added.
Between 1998 and the end of
2006, the amount that Spanish
banks lent for real-estate
activity rose tenfold to
€107bn.
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