Spanish Economic Growth Slows
One of Spain's largest banks, the Santander (owner of the Abbey in the UK) estimates that Spain's economic growth for 2008 will be a still robust 2.5% although down from the actual 3.8% growth for 2007. This forecast is more optimistic than recent reports from the IMF (1.8%), Funcas (2%) and the Bank of Spain (2.4%) but still behind the Governments won estimate of 3.1%. The estimate is also ahead of their view of economic growth within many other of the EU's other main economies. In relation to inflation, which stood at 4.5% in March, the Santander's forecast is similar to other recent reports suggesting that the rate of increase has peaked and will start to moderate in Spring / early summer and fall to around 3% before the end of the year. While the credit crunch and general weakness in the Spanish real estate sector can not be underestimated the indications are that the key economic variables effecting the property market should underpin the sector thereby ensuring a soft landing. With interest rates peaking and likely to start a downward trend, economic growth supporting employment levels and continued net immigration into the country it seems that the market for real estate will stabilise over the coming months with price adjustments arising from inflationary erosion rather than nominal level falls. For purchasers outside the Euro zone weakening of the European currency towards the end of the year should also help underpin demand from buyers from countries such as the UK, Russia and USA particularly in areas that attract lifestyle purchasers rather than speculative investors such as Mallorca.
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