Spain's housing boom finito

Spanish bank La Caixa has called time on the Spanish housing boom. Land prices have stagnated as house price growth has slowed.

The Times reports fears that "a sudden downturn in the Spanish construction sector could have knock-on effects in the UK. Hundreds of thousands of Britons have invested in property on the Costas and a collapse in its value could force asset sales in Britain."

Despite having a population one fifth smaller than the UK, the Spanish have built five times more properties as we have during the last few years. The construction boom has been staggering - nearly two million homes have been built on the Costas alone.

Hundreds of thousands have Brits have been buying Spanish properties on the back of domestic house price growth in the UK. With Spanish prices looking extremely expensive and such numbers of properties being built the outlook is not good for the Spanish housing market.

Five out of Europe's seven largest construction companies are Spanish. They now control not just many of Spain's largest companies but also our own in the UK. Over the last couple of years these Spanish companies have diversified away from construction on the Costas by buying up trophy assets in the UK. Airports (including Heathrow and Gatwick), mobile phone companies (O2) and a major bank (Abbey) have all recently been taken over by Spanish companies.

** In2Perspective provide free news and analysis emails on the UK, US and Indian property markets, interest rates and economy. If you would like to receive the free In2Perspective newsletters register here. **

©In2perspective Limited