Real Estate Collapses, Spain Trembles
What would happen to Indian real estate in few years? If you take a look at Spain, you may know the answer.
Spain was going thru heady times in real estate just like what India is going thru right now. Spanish real estate market is just collapsed.
Spanish real estate and construction firms are suffering a significant correction in their stock prices. This has sparked questions about the health of the sector, and alarmed investors and families that have mortgages to pay off. According to some organizations, people’s homes could be overvalued by as much as 30%. The construction sector has been one of the country’s motors of growth, so its cooling down could also affect the GDP.
The collapse of the stock market began with Astroc, the Valencia-based real estate firm, whose shares dropped by more than 64% in barely five sessions beginning in mid-April. Other companies followed, including Cleop, which has dropped by 20.5% since April 18. Fadesa has dropped 16.6%, and other companies such as Urbas, Colonia, Inmocaral, Montebalito, Sacyr Vallehermoso and FCC have all seen their share prices drop by more than 10% during this period.
Many parts of Spain witness falling home prices. People are rushed to sell their second homes and investment properties to accept whatever offer they could get.
Prices for apartments and houses accelerated at an annual rate of 15% between 1999 and 2005 in Spain. Price is going thru reverse cycle now.
It won’t be long before the same thing happens in India.
Related Link: Trouble with India
