Spanish mortgage lending falls 37.4% year on year in March
Wednesday, May 27, 2009 @ 6:09 PM
Spanish mortgage lending dropped 37.4 percent year-on-year in March, taking new loans to the lowest level seen in records dating back to January 2003, National Statistics Institute data showed on Tuesday.
March mortgage lending fell to 6.244 billion euros ($8.72 billion), the institute said.
The decline was slower than the 47.5 percent fall from a year earlier in February. However, the data still showed lending was only about a third of the level recorded at the beginning of 2007, at the height of Spain's decade-long property boom.
Economists say Spain's property and construction industries reached unsustainable levels during the bonanza years, when building accounted for up to 18 percent of gross domestic product.
This was made possible by ready funding available on foreign bond markets for Spanish banks, which then passed on the money to house buyers in Spain. This finance has dried up, making banks much less ready to lend and undermining the cycle of ever-increasing property prices and investment which made Spain outperform other euro zone economies for years.
Spanish gross domestic product (GDP) shrank 1.9 percent quarter-on-quarter in the first quarter, the country's worst contraction in half a century, due to the twin shocks of the global crisis and a housing collapse.
The average value of mortgages fell 13.3 percent in March from a year ago, the National Statistics Institute said, providing another sign of falling prices in a housing market which saw values triple in a decade.
Spain is struggling to become more competitive and to find new industries to fill the gap left by construction. (Reporting by Jason Webb; editing by David Stamp)