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Economics professor talks up Spanish property market recovery

Gonzalo Bernardos, a professor of economics at the University of Barcelona, believes that there will be more property sales in 2009 than there were in 2008.

He list five reasons why this is likely; lower interest rates, property prices at 2003 levels, banks lending more, the return of property investors, and many people who were thinking of renting deciding to buy instead.

He believes that demand for property is tempered by the cost of mortgage borrowing. With interest rates declining, Bernardos expects sales to pick up.

'There is a fundamental variable. People buy homes in response to mortgage costs, which have gone from rates of 6.25% in September to 3.25% today. We are talking, in general terms, of a fall in mortgage repayments of 40%,' he explained.

He said the recover is already underway and another positive sign was an increase in the number of new property starts which rose in the last quarter of 2008 and were up 7% compared to the previous quarter.

The professor is sceptical of official property figures released by the Spanish state and believes that sales are between 25% and 40% higher than this time last year. Official figures claim that property prices fell by 28.8% in 2008 but he believes 20% is a more realistic figure.

But he warns that a sudden rise in property prices is not going to happen. 'Sales will start to rise in 2009, whilst prices will stop falling in most places by the end of 2010,' he said.