The roof is more important than food

Rising interest rates and housing prices began to restrain the growth of the Spanish economy. According to the National Institute of Statistics, published August 29, 2007, annual GDP growth fell from 4.1% to 4%. Quarterly economic growth has also declined from 1% to 0.9%. The cost of payments on mortgage loans have even led to a decrease in consumer spending. In general decrease in economic growth observed in the construction, which accounts for about 18% of GDP. As developers continue to adjust to lower demand for new housing and public works, the annual growth of investment in this sector was 4.8% compared with 5.2% for the I quarter. This figure differs from the annual growth rate of the highest 10-year rise in the real estate sector for more than 15%. According to agents selling the property, after 10 years of dynamic growth in demand and, consequently, of the frequent examples of speculative investment interest from foreign and domestic customers to facilities in large parts of the Mediterranean coast for the past two years has fallen sharply. Part of this decline due to rising interest rates on mortgage loans and alignment of property prices in Spain and other parts of Europe. In addition, a number of corruption scandals and cases of theft during construction have reduced the desire to buy property in Spain. After the British mortgage bank Northern Rock approached the Bank of England to provide a term loan, the British and the Spanish media reported that three Spanish bank sought urgent financial assistance from the European Central Bank. This has caused some nervousness in financial markets, and shares of Spanish banks have plummeted in price. In particular, on September 10, 2007, the bank Bankinter, the average Spanish bank, lost 5.9%. The price of shares of the bank Banco Popular fell by 2.9% and the share prices of big banks such as Santander and BBVA, fell by 1.6% and 1.9% respectively. This creates uncertainty in financial markets Spanish banks may have difficulty obtaining credit abroad. This credit is sure to become more expensive. Concerns about liquidity makes the Spanish financial institutions to restrain lending, especially in high-risk sectors such as construction and real estate. In mid-September 2007 the Spanish bank Banco Popular reversed placement of mortgage securities at 2 billion euros. Ahorro Titulizacion, an investment company owned by a group of Spanish savings banks, also lifted the issue of securities. Further, the Spanish construction company "Llanera," which deals with construction of vacation homes in the area of ​​the Mediterranean city of Valencia, was in a difficult position and is holding intensive talks with lenders about restructuring its debt, is approximately 300 million euros. This company has until recently was among the most promising Spanish companies. According to reviewers Financial Times, «Llanera" tried to convince the local savings bank Bancaja and other creditors to take part of their land as payment of debts. The company recognized the fact of such negotiations, told the FT on the availability of a liquidity crisis. "We are negotiating with our banks," - they said. According to experts, the company "Llanera" may become the first major casualty in Spain as a result of restrictions in lending that has engulfed much of the global financial system. Many real estate agents go out of business. According to Professor Manuel Madrid business school Romer, more than 60% of real estate agents have stopped working in the area of ​​Alicante, which is a popular holiday destination in the province of Valencia. Major developers and construction companies that have invested in other sectors and outside of Spain, seems to be prepared for rapid change. However, experts believe that a significant proportion of firms will share the fate of "Llanery." Spanish officials and representatives of the Spanish banks do not recognize the existence of the financial crisis in the country. In their view, Spanish financial system is stable. Its banks are well capitalized and their activity is successful. Indicators of non-payment of loan debt low, and the level of provisioning for bad debts is high. In particular, Finance Minister Pedro Solbes of Spain and Bank of Spain attempted to calm financial markets, saying that none of the Spanish banks did not apply to the European Central Bank for term loan. Chief Financial Officer of the bank Bankinter FT expressed his opinion: "Our needs in finance in 2007 satisfied. We have no liquidity problems. I believe that stock markets influence uncertainty and panic. " According to the main financier of the bank Banco Popular, Roberto Higuera, "this is not a liquidity crisis." "This is a crisis of confidence - he said. - No one knows who supports the idea of ​​increased risks. The only thing I can say - is that their source is located outside of Spain. " In spite of the unpleasant symptoms, the Spanish Government is optimistic. Officials expect that its economy will grow this year by 3.7%. The country is still considered one of the fastest growing in Europe. Russian experts in the real estate perceive these concerns, the real estate market in Spain rather calmly. According to Catherine Thain, director of residential luxury real estate of the Moscow branch of Knight Frank, the attractiveness of residential real estate in Spain actually decreased significantly. "But the demand among buyers for their own accommodation is not provided decisive. People choose the country they love and they fit the criteria, "- she said. Consultant in the real estate company Kirsanova Realty Svetlana Skotnikov believes that demand for luxury housing in Spain by Russian citizens almost constant and hardly depends on the situation on world financial markets. In her view, the Spanish real estate is still attractive to Russian buyers. Compared with Italy and France, property prices in Spain below and to overcome the formalities associated with the purchase easier. The Director General Elena Shuvalov Lobby agency admits that the emerging financial crisis and the language barrier can lead to some reduction in demand from Russian citizens on real estate in Spain. According to her, for Russian citizens may be more attractive housing (or "summer house") in Montenegro and Bulgaria. Among the Russian citizens who have already purchased property in Spain, there is no concern regarding further ownership. One of them shared his thoughts. "Real estate is acquired for a long time, and crises come and go," - he said. In addition, real estate is getting cheaper as a result of lower demand. "That is why Russian citizens, this situation is beneficial. Therefore, it is logical to assume that the demand among Russians for a property in Spain could increase, "- says the man who knows the situation first hand experience. (Information used FT.) Source: Bulletin of the author: Yuri Sklyanin