By Paul Day

SPANISH house prices fell at their slowest rate in over a year in the fourth quarter, data showed yesterday, though high unemployment and a mountain of unsold housing stock suggested the slump was far from over.

House prices fell 4.3 percent year on year after a 7 percent slide in the July to September period, the National Statistics Institute said. “What we're seeing is a levelling off, but we certainly can't start talking about price rises. It seems the economy has hit bottom and will probably remain low for some time,” said economist at M&G Valores, Nicolas Lopez.

The fourth quarter drop was the seventh consecutive quarterly decrease in house prices, which have now lost about 10 percent since their peak in the third quarter of 2007.

But with Spanish unemployment at 18.8 percent in the fourth quarter and more than a million unsold new homes on the market, the property sector remained overvalued, economists said.

Spain's banks have been hard hit by the property slump and mortgage lending fell 17.1 percent year-on-year in December.
Even so, the adjustment here has been less severe than in some other markets including Ireland, where asking prices have fallen by almost a quarter from their peak. “We believe that the official house price series continues to understate the weakness of the housing market, and that house prices have fallen more acutely,” said economist at HS Global Insight Raj Badiani.

The official data is based on asking prices rather than the final agreed prices, Badiani said, adding other housing-related indicators suggested the real estate sector remained under pressure.