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THE spectacular and seeming never-ending rise in property prices in the province of Malaga over many years is fast becoming a thing of the past. Statistics published recently by the Ministry for Housing reveal a clear tendency for excess supply and decreased demand, resulting in a lowering of prices. For the first time since the middle of 2001, house-price increase has remained below the psychologically significant two-digit figure, registering an increase of 9.8 per cent. Property prices, which have been rising constantly higher and higher over past years, are now decelerating for the first time in decades. Fear that the property bubble is about to burst is frightening away investors anxious to make a fast profit.
Expectations
If the expectations of the experts turn out to be correct, we will see a further sharp drop in property price in the short term. The alarm has been raised by a property sector report put out by the University of Barcelona recently, in which we are told that the price of an average property in Spain will drop by 20 per cent during the period 2007-2009. According to the authors of the report, this fall in prices will conform to changes in the market such as a slowing of economic growth generally, excess supply and reduction in demand. Speculators and investors cannot expect to obtain the same attractive results as before, and they would be well advised to seek fast profits elsewhere.
Rising interest rates
This drop in prices coincides with rising interest rates, and mortgages are now more difficult to obtain for the average citizen. The experts we consulted all agree that the overall economic situation has much to do with falling property values. “People are spending more time now examining their own accounts and deciding that the time to buy may not be quite right,” says one expert. The result is an explosive cocktail that most investors would prefer to avoid.
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