Economic and property forecasters in Spain may want to revise their predictions this month, after prime minister Mariano Rajoy indicated the government will be doing the same. Reuters reported that the country is to undergo a revision of official forecasts to ensure they more accurately reflect the Spain’s economic position.
“International organisations have changed their forecasts on a number of occasions and there are factors that, no doubt, will oblige us to do that … I believe we will change our forecasts,” Mr Rajoy stated in Parliament. According to Reuters, projections are likely to be revised in April to a 0.5 per cent contraction in gross domestic product (GDP) for 2013. This will coincide with the passing of the forecasts to Brussels. However, most analysts believe that GDP will shrink by 1.5 per cent this year.
The recent Cypriot bailout will do little to improve conditions in Spain and there is a already fear that a contagion will ensue in the eurozone. As details of the crisis package emerged earlier this week, Spanish yields increased by 15 bps to 5.08 per cent. Lyn Graham-Taylor, rate strategist at Rabobank, told Reuters: “What they’ve done is a fundamental change in terms of how deposits are viewed in terms of safety. It’s a clear danger of contagion spreading to Spain and Italy, etc. If you’re a Spanish depositor would you keep your savings in Spain or move them to Germany?”
So will falling GDP affect Spanish property forecasts? Unfortunately, the answer is likely to be a resounding yes and financial instability is likely to bring with it high unemployment and low levels of real estate activity in domestic markets. However, in popular resorts the country’s economic position is likely to do very little damage to housing demand. Foreign buyers continue to be attracted to Spain for second homes and holiday lets, taking advantage of falling property prices. Nonetheless, it is still a cash market and buyers must ensure they are able to secure finance.