While Britain’s housing shortage continues to fuel its property bubble, the rapacity of property developers in Spain may have caused the market there to crash. A report from the Spanish Government has shown domestic house prices rising at their slowest rate since the late 1990s.

The price climb may be slowing due to housing oversupply generated by an array of property developers eager to feed one of the most popular second-home markets in the world.

Subsequent selling of the real estate companies as well as the banking firms that were supplying mortgages in the region had become almost panicked. Pedro Solbes, the minister of economy and finance, played down the slump as a ‘major correction’ and said there was no cyclical change in the industry. The rise in prices during the
first three months of this year was 7.2 per cent year-on-year.

Following developments, AIM-listed Medsea Estates, which invests in Spain and Italy, decided to reassure its investors about its own trading. In Spain, it saw unit sales ‘marginally ahead of last year’ and chairman Tony Gatehouse maintained that the issues were a ‘localised problem’ on the Costa del Sol where Medsea does not operate. ‘We are selling residential property in other coastal areas where selling prices are being sustained and demand from international buyers, who account for the bulk of our sales, remains firm,’ he reported.

The 7.2 per cent Spanish increase compares with a 9.3 per cent yearly upsurge in the UK, according to building society Nationwide, with a 0.9 per cent month-to-month rise. Remarked Nationwide’s chief economist Fionnuala Earley: ‘While the monthly rise in prices is stronger than the Monetary Policy Committee would have liked to see, it can take some comfort from the fact that the underlying trend is softening.’ She foresees an interest rate rise to be ‘a certainty’.

Medsea Estates Group	AIM	£0.35m	0.45p	0.00p
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