Rise in interest rates causes fall in house prices

PALMA
THE progressive rise in interest rates during the last year has had a direct effect on prices of second hand homes in Palma, creating a slump with reductions of up to 20 percent, according to the property brokerage company Tecnocasa.

Company sources, speaking in the Real Club Nautico in Palma, said that the increase in interest rates, which are expected to rise again during the next few months, “has notably reduced the prices of homes in the most reasonable districts of Palma. “This confirms the readjustment of the property bubble which has been prevalent during the last three years in Palma and in the Balearics”.
Tecnocasa's figures show that a second hand home of between 70 and 80 square metres situated in a district such as Pere Garau now sells for 1'900 or 1'500 euros per square metre, when last year the price was around 2'200 euros per square metre. “It is clear that the tendency is towards more realistic prices in the districts of Palma. “However, this is not happening in the case of the old part of the city, where there is a great demand for property”, added the sources.
Another, more negative, aspect found by Tecnocasa is the progressive increase in the amount of people in arrears with their mortgages. Because of this, all the financial entities are now adopting measures to combat this when they grant a mortgage. “The shutters are down and mortgages are not being granted with such ease these days. However the fall in the prices of holiday homes is reactivating this sector in the part of the population which has medium spending power”, said the Tecnocasa sources.