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As Jeremy Grantham wrote this is the first global asset bubble. California and Florida have more company with each passing month...
Zapatero Depletes Surplus as Housing Shakeout Reduces EU Growth
By Ben Sills
March 28 (Bloomberg) -- Miguel Angel Lopez and Virginia Pardo watched the steady rise of interest rates last year as they expected their first child and wondered whether they would be able to keep up with the mortgage on their two-bedroom Madrid apartment...
...Residential construction, which accounts for about 6 percent of Spain's economy, peaked in 2006 after a decade-long surge fueled by a drop in interest rates, growing incomes and vacation home purchases by Britons, Germans and other northern Europeans. Housing prices gained 11 percent a year on average, as even ordinary Spaniards speculated in real estate...
...Spain's economic growth, which outpaced the euro-region average, provided a quarter of the single-currency area's new consumer spending during the past four years, according to the European Union's Luxembourg-based statistics agency, Eurostat. That's more than five times the contribution of Germany, where the economy is three times the size.
Now, a glut of properties weighs on the market, and interest rate increases and tighter bank lending standards make it more difficult for buyers to finance. The supply of new homes in 2006 outstripped demand by about 50 percent, according to government estimates...
...The slowdown can be seen on the streets of Madrid, where buildings are plastered with ``For Sale'' signs and it's getting easier to find a seat in the normally packed cafes.
``People just don't have any money,'' Antonio Romero, a taxi driver, says.
``With so many people on low wages, the price rises are really being felt and people are cutting back on unnecessary expenses.''
Romero, 53, says his earnings have fallen by a quarter since last year. Customers who might have taken a 25 euro cab to the airport when they went on vacation are now asking to be dropped off at the metro station, which is usually a fare of less than 10 euros, he says...
...Investors are increasingly reluctant to lend to Spanish banks on concern that falling property prices may hurt their credit ratings. Banks have responded by making it harder and more expensive to borrow...
... Mortgage-lending growth at Madrid-based Banco Espanol de Credito SA, the retail bank majority owned by Banco Santander SA, the country's largest bank, fell by almost half in the fourth quarter, while the number of borrowers missing payments for the first time doubled. Mortgage-lending growth may slow to 6 percent this year from 15 percent in 2007...
...Accelerating price gains, caused by global pressure on the supply of food commodities and oil, are eating into wages, and new jobs are becoming scarce.
The price of milk rose 28 percent in the past year, bread rose 12 percent and gasoline was up 17 percent. Unemployment claims rose for a fifth month in February. G14, a trade group representing the country's largest developers that is lobbying for subsidized loans, estimates 1.1 million residential and commercial construction jobs will be lost...
...``There's a crisis coming, and in Spain we're all going to feel it,'' he says. ``Real estate is obviously one source of the trouble, but there may be others. We just don't know.''
http://www.bloomberg.com/apps/news?p...I2Q&refer=home
By Ben Sills
March 28 (Bloomberg) -- Miguel Angel Lopez and Virginia Pardo watched the steady rise of interest rates last year as they expected their first child and wondered whether they would be able to keep up with the mortgage on their two-bedroom Madrid apartment...
...Residential construction, which accounts for about 6 percent of Spain's economy, peaked in 2006 after a decade-long surge fueled by a drop in interest rates, growing incomes and vacation home purchases by Britons, Germans and other northern Europeans. Housing prices gained 11 percent a year on average, as even ordinary Spaniards speculated in real estate...
...Spain's economic growth, which outpaced the euro-region average, provided a quarter of the single-currency area's new consumer spending during the past four years, according to the European Union's Luxembourg-based statistics agency, Eurostat. That's more than five times the contribution of Germany, where the economy is three times the size.
Now, a glut of properties weighs on the market, and interest rate increases and tighter bank lending standards make it more difficult for buyers to finance. The supply of new homes in 2006 outstripped demand by about 50 percent, according to government estimates...
...The slowdown can be seen on the streets of Madrid, where buildings are plastered with ``For Sale'' signs and it's getting easier to find a seat in the normally packed cafes.
``People just don't have any money,'' Antonio Romero, a taxi driver, says.
``With so many people on low wages, the price rises are really being felt and people are cutting back on unnecessary expenses.''
Romero, 53, says his earnings have fallen by a quarter since last year. Customers who might have taken a 25 euro cab to the airport when they went on vacation are now asking to be dropped off at the metro station, which is usually a fare of less than 10 euros, he says...
...Investors are increasingly reluctant to lend to Spanish banks on concern that falling property prices may hurt their credit ratings. Banks have responded by making it harder and more expensive to borrow...
... Mortgage-lending growth at Madrid-based Banco Espanol de Credito SA, the retail bank majority owned by Banco Santander SA, the country's largest bank, fell by almost half in the fourth quarter, while the number of borrowers missing payments for the first time doubled. Mortgage-lending growth may slow to 6 percent this year from 15 percent in 2007...
...Accelerating price gains, caused by global pressure on the supply of food commodities and oil, are eating into wages, and new jobs are becoming scarce.
The price of milk rose 28 percent in the past year, bread rose 12 percent and gasoline was up 17 percent. Unemployment claims rose for a fifth month in February. G14, a trade group representing the country's largest developers that is lobbying for subsidized loans, estimates 1.1 million residential and commercial construction jobs will be lost...
...``There's a crisis coming, and in Spain we're all going to feel it,'' he says. ``Real estate is obviously one source of the trouble, but there may be others. We just don't know.''
http://www.bloomberg.com/apps/news?p...I2Q&refer=home