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Experts predict Spanish downward spiral will continue

According to the data from the National Institute of Statistics the resale market has been hit particularly hard, with sales in October down 43% year on year, and by 38.7% in the first 10 months of the year. Resales fell by 65.2% in the Balearics, and by 44.7% in Catalonia.

New build transactions, on the other hand, were only down 8.7% in October, and 13.7% on an accumulated basis, suggesting that the new build sector is managing much better in the market downturn.

But the because of long sales cycles in the new build market, the INE's figures reflect sales originated in better times and do not yet reflect the collapse that developers have experienced with new builds.

There is no doubt that last year was the worst ever for the Spanish property sector and it isn't going to get much better according to Pedro Pérez, general secretary of the G-14 group of Spain's biggest developers, who is predicitng prices are going to continue on their downward spiral.

'New build property is now between 15% and 20% cheaper. This is the biggest fall we have ever seen. Furthermore, 2008 has been the worst year since property statistics began,' said Pérez.

'I don't see any light at the end of the tunnel. And if there is no change, prices will continue falling,' he added.

Property experts say that big price falls are needed to bring the Spanish property market back to life. 'At the moment the housing affordability ratio stands at seven times average annual disposable income. We will return to equilibrium when this figure falls to four, which is where it was in the year 2000, before the property bubble began to inflate,' said economics professor José García Montalvo.