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Sharp downturn in Spanish property prices confirmed by latest figures

Prices on the Spanish Mediterranean coast fell by 8.3% over 12 months to the end of August, according to figures just released by Tinsa, one of Spain's leading appraisal companies.

This compares with an average drop of 4.6% for the whole of Spain. The figures cover both newly built and resale property prices but do not take into account consumer price inflation.

When you adjust for consumer price inflation, which was 4.9% in August, coastal property prices fell by 13.2% in real terms over 12 months and by 9.5% for the whole of Spain.

Property prices in the suburbs of Spain's big cities, where the bulk of the country's mass of unsold flats is located, fell by 7.1% in nominal terms. Spain's property market crash began in city suburbs and coastal municipalities, driven by speculation and over-development, and these areas are still taking the brunt of the crisis.

Whilst costal prices on the mainland are falling the most, prices on Spain's islands appear to be doing better, at least according to Tinsa's figures. Property prices in the Balearics and the Canaries fell by only 3.8% in nominal terms over 12 months to the end of August.

But those in the property industry are still optimistic for the long term. 'The next 12 months will be more of the same and 2009 will also be a difficult year, not better, not worse,' said Paul Rossiter of Carrington Estates.

'There is still interest from Swedes, Germans, Dutch and Russians, particularly at the top end of the market which remains strong as people with that kind of money are not really affected by the credit crunch,' he added.

However the next twelve months for Spain will be determined more by what happens in other markets both in the UK and in emerging markets, according to Daniel Zartash-Lloyd of Malaga-based Duchy Estates.

'In recent years investors have been attracted to so called "cheap" property in eastern European markets. These areas have seen artificially inflated prices due to a mass of foreign investment. As those markets turn sour people will be attracted back to the traditional "safer" countries such as Spain, where the benefits of a stable economy and undeniable features such as climate, locality to home and a superior infrastructure become more important again,' he said.

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