House prices rose more slowly in June

AVERAGE Spanish house prices rose in June, although at a slower rate than in March, with prices of new housing falling in four regions including the Balearics in the second quarter, official data showed yesterday. The Housing Ministry said average house prices, which includes new and used housing, rose 10.8 percent year-on-year in June, 1.3 percentage points lower than the rate in March. The European Central Bank has frequently expressed concern over the pace of house price growth in Spain because of its possible implications for overall inflation while the Bank of Spain is worried about the risks from high mortgage borrowing. The expansion has also been felt via booming profits at construction and property companies, and with banks registering annual growth rates of 20-30 percent in mortgages for several years now. The housing market has been fuelled by historic lows in interest rates. But signs that the property boom may be slowing came from new house prices in the regions of Madrid, the Basque country and the Balearic Islands, which fell an average 0.1 percent in the second quarter versus the first. In the southwestern region of Extremadura, prices fell 1.9 percent in the same period. New housing in all of the rest of Spain's 17 regions rose an average 3.0 percent in the second quarter against the first, with the four regions bordering Spain's Mediterranean coast up between 2.9 (Andalucia, Valencia) and 5.2 percent (Catalonia). Average prices rose in all regions at the end of June year-on-year, with northwestern region Galicia showing a 19.3 percent gain and Madrid at the other end of the scale with a 7.5 percent increase. Earlier this week, analysts at banking group BBVA warned that a brusque adjustment in the housing market was now more likely because of the continued strength of the market.