It predicts a decrease in prices and asks for more tax benefits in home purchase

The Bank of Spain advocates special measures for specific groups

Special care should always be taken of the goose that lays the golden egg, and the golden egg in this country over recent years has been the property sector. And now, in a rare exercise in humility, the sector itself has admitted that it has been overcharging purchasers of houses in Spain. “We increased prices too much and drove buyers out of the market place,” says Antonio Trueba, managing director of the Parquesol property company, in an admission that many people may believe to be too little too late. He made this extraordinary statement during a conference organised as an event prior to the Sima 2008 Fair, in which he was taking part as a representative of the sector.

At the same meeting, property executives demanded that the government provide more tax benefits for house purchasers in Spain, while the Bank of Spain showed itself to be in favour of financial aid for specific groups only. The consensus of opinion was that house prices would drop over coming years. The Sima 2008 Fair opened last week with companies in the sector immersed in one of the most severe recessions of recent times.

Crisis

There are many thousands of houses unsold, and imaginative steps are being taken to sell them. At the same time, property company bosses are attempting to convince the government that unless they do something about it, the situation will get worse and begin to seriously affect the general economy. In this atmosphere, Trueba recognised that there is now excess offer in the market, and that some companies are up against the wall as a result. “We have to contain the crisis,” he said in his speech, insisting that the sector was already condemned to a re-adjustment of prices before the recession began last summer.

One of the most severe problems for property companies at the moment is debt. Many loans were made to companies over recent years that they cannot now pay back. “There have been many take-overs in the sector, especially of smaller companies, and many more will take place in the future,” said Trueba. In his view, the property companies have purchased too much land at inflated prices, and now they are paying for this mistake. “The change of cycle will last three more years, and will be serious,” said the property company representative.

The conference, whose aim was to discover if there really is a crisis in the sector, has made it clear that the crisis is already here. “The big property companies (known in Spain as the Golf-14) have experienced a fall of 70 per cent in the initiation of new houses so far in 2008,” said Trueba, adding that house prices are likely to drop by 15 per cent over the coming two or three years.

Low income groups

The fault does not lie entirely with the property companies, said Trueba. Part of the responsibility, he added, was what he called a perverse urban planning policy on the part of the politicians. To get out of the crisis, companies must make imaginative plans, including the sale of some of their biggest assets..

Trueba was accompanied at the conference table by the director general of the Studies Service of the Bank of Spain, José Luís Malo de Molina, who suggested that, instead of something for everybody, selective measures should be taken to assist specific groups, such as young people, immigrants and low-income groups.

He reminded his listeners of the dangers inherent in any attempt by the state to take advantage of the housing surplus. House prices are now increasing more slowly than inflation, he added, warning that private individuals and companies will now have greater difficulties in getting loans.

Regards