Three years after the outbreak of the financial and economic crisis, Spain is one of the countries of the European Union where, the price of housing is still overvalued by about 17% compared to the 3% average in the Euro-zone; according to the quarterly report published by the European Commission about the Euro-zone. It says Spain is still far from completing the adjustment of prices in the construction industry needed to consolidate the recovery.
The housing bubble continues in Spain despite having experienced the second largest drop in home prices in the Euro area (-18%) from the peak reached in 2007. Only Ireland exceeded this, where the price has plummeted by 37% while lowering the Euro-zone average at 8.3%.
The Brussels study shows that, in late 2008, housing prices in Spain were still overvalued by 24%, the highest percentage in the EU. Whilst the United Kingdom was at 18%.
In the case of Ireland, it had already done most of the adjustment of property (and prices were only 3% above its equilibrium level), while in Italy and France the over valuation was moderate (8% and 9% respectively). Germany and the Netherlands were the only countries in the eurozone without a bubble. In the U.S., housing was overvalued by 15%.
Throughout 2009, the adjustment of housing prices in Spain was just seven points, so that by the end of the year still recorded a "significant over valuation" of 17%. In contrast, other member states like France and Italy "probably reached a price level nearly balanced in the third quarter of 2009, while prices in Ireland continued to fall even below the equilibrium level.
The EU executive's report concludes that, on average, most of the gap in housing prices in the Euro area has already been corrected.
However, the Commission warns that this average "masks important differences between member states. "In late 2009, the correction of housing prices was well under way in some, but still had some way to go in others," in reference to members such as Spain. "In addition, a few Member States, notably Germany, have now undervalued home prices," it says.
Europa Press
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