Spanish property market Imploding

Spain is reaching that “when it rains…” moment. Unemployment is taking out new highs, PMI is falling off the cliff, the new PMs honeymoon is over and the property collapse is about to happen. Prices have come off from their highs,  but it is not until this year we can expect the real downturn as the banks are forced to start hitting the market with their inventories of empty properties. If you think the US had a bubble, Spain is much worse. The big elephant in the European room is in motion. From Bloomberg.

Spanish home prices are poised to fall the most on record this year, leaving one in four homeowners owing more than their properties are worth, as the government forces banks to sell real-estate holdings.

Home prices will decline 12 percent to 14 percent, according to research and advisory company R.R. de Acuna & Asociados, after Economy Minister Luis de Guindos in February gave lenders two years to make 50 billion euros ($67 billion) of additional provisions and capital charges for losses linked to real estate. That’s the most since the National Statistics Institute started tracking values in 2007. Standard & Poor’s forecasts borrowers with negative equity may rise to 25 percent this year from 8 percent in 2010, based on an analysis of 800,000 mortgages.

“There will be more serious price drops this year because of the government decree,” said Fernando Rodriguez de Acuna Martinez, a partner at the Madrid-based firm. “Banks are now prepared to incur big losses on real estate to shift all they can.”

and just a reminder of the word “mortgage”,

The word “mortgage” originates from Law French and literally means “death contract”.

Full article here.