Tuesday, Apr 24, 2007
Spanish Bubble in danger of bursting
FT.COM: Spanish property groups weigh on Europe
Fears that the Spanish property bubble, which drove companies like Metrovacesa and Sacyr Vallehermoso more than 100 per cent higher last year, was in danger of bursting was highlighted by Monday’s 41 per cent fall for Astroc Mediterraneo
Posted by sirgoogle @ 08:35 PM (307 views) Add Comment
11 Comments
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1. sold 2 rent 1 said...
He said: "Spain is going to face the very direst of economic circumstances: a cycle of recession, deflation and widespread private sector default - a depression in fact. This stock market slide is not just a 'correction'. It has a very, very, long way to go."
Is it D for Depression?
"I can see a mortgage crisis building. We have a serious property bubble in this country and everyone is in denial; it's worse than the US." Re/Max International said it had cut prices by 25pc on holiday homes in saturated regions earlier this year"
25% - or is it D for deflation?
Both. And Spain is leading the way into the abyss.
Guys. When will you wake up?
This isn't about HPC any more.
It's about a deflationary depression
2. sold 2 rent 1 said...
All current asset prices are based on humungous levels of debt.
When these so called analysts come up with figures of how much property is overvalued they are thinking about returning to debt levels of the 1980’s
But what happens if we have to return to debt levels of the 1930’s?
The situation is dire.
3. japanese uncle said...
Spot on!
Typical house price in Madrid was reaching the level above 10 times average annual salary, thus 60-70% correction is inevitable, historically. Exactly the same applies to the UK. Such a severe decline in one of the dominant element of our expenditure cannot help exerting negative ie deflationary influence over the general price levels of goods and services. Furthermore there is additional factor in the UK, ie 1.5 million immigrants happy to work at lower salary. Besides unions are virtually non-existent where employers are given freehand to sack workers in the UK. Deflation, rather than inflation is beyond the horizon, I believe.
4. holding out said...
Deflation would require the currency to maintain it's relative values against importer country currencies such as JPY, EUR and of course YUAN since we can hardly source our own goods as we no longer have the means. Why are you so confident the £ will hold it's strength.
5. japanese uncle said...
I am not that confident actually. Unless there is run on pounds, deflationary trend may prevail. If there is run, pound could well be 120 yen or so. And imported goods must be priced twice the level as they are. Sure.
6. Kyuzo said...
There are plenty of immigrants working for low wages in parts of Spain too, mostly from South America. Until recently these "poor" workers came from other, less developed parts of Spain, where unemployment was rife, and small country towns disappearing with the loss of (low-paying) jobs in the country. In Barcelona, many bar staff are now South American, as are cleaners, refuse workers, farm hands etc. The locals bewail the fact that the "career" waiter they'd known all their lives who was able to afford to run a family has disappeared. But while the price of food and drinks in bars has gone up a lot since the introduction of the Euro, salaries have not kept pace...
7. dohousescrashinthewoods said...
FT front page is now listing "Spanish property boom ends"
(http://www.ft.com/cms/s/f748439e-f29f-11db-a454-000b5df10621.html)
There is also a suscriber-only analysis (I can't access) entitled:
"Analysis: Writing was on the wall for Spanish housing bubble"
(http://www.ft.com/cms/s/99cfbb46-f28d-11db-a454-000b5df10621.html)
Oddly it is listed underneath the Sainsbury's story.
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