The Leading Housing Bubble Indicator In Spain is...
Irresponsible, exuberant journalism? There is not a single doubt that Spain, along with some other European countries, has been experiencing a housing boom in the last... Well, for a very long time.
The pop heard 'round the peninsula
According to Spanish property bubble 'is about to burst' over at Expatica, though, this bubble is about to burst, because, well:
- Stan Dickens, Spanish property expert told the daily El Pais there were signs of "overheating" in the market [...] "Price rises are such that nobody can deny there is a bubble," he said.
- Spanish property developers predict house prices will cool down by up to ten percent this year.
- The Association of Property Developers says prices for new homes should go down by between five and ten percent in 2006.
A closer look
So lets see here, signs of overheating - and by the title of the article, the bubble bursting - include that nobody can deny there is a bubble
. I wonder how they measure that? Are there degrees of denial?
Next up, prices will "cool down" by up to ten percent this year. By "cool down", does that mean drop, or just pull back from the 10 percent increase seen in 2005? If so, that still means that prices will hold, hardly a bursted bubble.
The third quote seems to hold a little more water - though it would have been nice of them to outline where that figure came from: it talks about new sales, not resales, and prices may go down to attract more buyers, and there have been rumblings in the press (can't find the link) that buyers are looking more and more at resale homes.
So what, then?
So there is a boom, there's plenty of evidence that is the case, but whether the bubble is about to burst is another ball'o wax - there is a lot riding on that bubble, and some argue that letting it burst isn't the best idea for Europe at the moment.
My hypothesis then is that a bubble bursting leading indicator is when news agencies begin writing stuff like this. We'll check back on this in January '07.
Totally agree, seems to me that the crazy yearly % increase may fall rather than house prices actually falling. So yes, house prices may increase by 7 perocent next year instead of 17, hardly a bursting bubble....
Well said :-)
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