Annual Spanish property inflation at the end of September was 5.3%, so to fall to 4% by year end the government is assuming that price growth will continue to slow during the last quarter of the year.

Speaking at a conference organised by the Instituto de Empresa business school in Madrid, Pacheco said “the progressive convergence of house prices with consumer price inflation has accelerated,” but he nevertheless predicts a “soft landing” for the Spanish property market in the context of an adjustment for the sector.

He ruled out a serious crisis or a “drastic fall in property prices that threatens the national economy,” and pointed out that Euribor has started to decline, which will ease the downward pressure on property prices.

Pacheco also forecast that 550,000 new homes and 100,000 council houses will be built this year, ruling out any “paralysis” in the construction sector.

Regards property transactions, Pacheco forecasts 900,000 this year, down from 1 million in 2006. “This is not a crisis, just a necessary adjustment for the sector,” he said.

According to the article experts agree that rural land near to big cities or in areas with good tourism potential is still an excellent investment.

The price per hectare for rural land has increased by 30% per year for the last 2 years, but only in areas with the right climate and other conditions suitable for recreation.

Though recreational buyers have been driving the market for attractive rural land, 2 other factors are now adding to demand for rural property in Spain: solar energy farms, and cereal farms for biodiesel fuel. Demand on hold in anticipation of property price falls

Demand for property in Spain may be on hold in anticipation of price falls, according to the head of one of Spain’s largest savings banks.

According to an article in the Spanish daily ‘El Mundo’ Juan María Nin, head of La Caixa, believes that the property market is cooling down in an orderly fashion, but worries that if expectations of price falls take root, this could prove very damaging to the market.

Big Spanish developers see sales fall by between 30% and 50%

The downturn in the Spanish property market is hitting the sales of Spanish developers hard. Sales at 3 of the biggest quoted developers – Martinsa-Fadesa, Metrovacesa and Acciona – are down by between 30% and 50% to September this year, according to recent company filings with the stock market regulator. Needless to say, sales could fall even further if buyers hold off in anticipation of price falls.

And talking of price falls, the developer Martinsa-Fadesa does not rule out lowering its prices “if market conditions demand it”, according to a recent article in ‘El Mundo’.

The article reports that Fadesa can afford to lower its prices if necessary for various reasons. Firstly, it has a healthy gross margin of 45% that gives the company room for manoeuvre, and secondly, with a land bank of 28 million square meters, a third of it outside of Spain, Fadesa’s land costs are only 10% of its retail prices, compared to 50% for developers who buy land with planning permission in place.

No mention is made of Martinsa-Fadesa’s huge level of debt, and whether the company can afford to lower its prices in a falling market and still meet its interest payments.