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Spanish housing market: Crisis? What crisis?

A glut of about 400,000 properties built in the frenzy of a construction boom now weighs on the Spanish housing market, putting downward pressure on house prices.

Spain’s saving banks seek new funding strategies

Principal portfolio holdings of the cajas

Caja Navarra sells on civic banking

Manuel San Salvador, Banco Urquijo

"Given how much Spanish bank stocks have fallen so far this year, our analysts believe that it may actually be a good time to buy Spanish banks"
Manuel San Salvador, Banco Urquijo

This excess supply has led to a dramatic fall in the number of new houses being built, hitting property developers and construction companies with lower growth and unsold inventories. Employment in the construction sector has also been hit, despite having created 768,000 jobs in Spain since 2000. These forces are expected to contribute towards a significant slowdown in Spanish GDP growth from 2008 onwards. Standard & Poor’s forecasts a fall in GDP growth from 3.88% in 2006 to 3.69% in 2007 and 2.44% in 2008.

Although the bear is the symbol of Madrid, it is hard to find many bearish bankers in the Spanish capital where the Ibex30 index this November hit an all-time high and the predominant view is that international investors’ fears about the Spanish property market’s impact on the rest of the economy and on Spanish banks in particular are overblown and confused with the US sub-prime crisis.

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