Property boom far from over!

House prices continued to show signs of a gradual slowdown in the second quarter of this year, but the country's massive property boom seems far from having run its course, according to figures released Wednesday by the appraisers association Tinsa.

Property prices were up 3.53 percent in the three months to June, against a rise of 4.35 percent in the first quarter of this year and 5.35 percent in the last quarter of 2004. This trend was even more notable in provincial capitals, where prices of new homes grew only 1.37 percent. Costa del Sol still continuing to record substantial gains.

But on a year-on-year basis the increase for new homes was a heady 17.17 percent, while prices for second-hand houses were up 17.29 percent. House prices have risen over 140 percent since the market took off in 1997. The bank of Spain has estimated the market is overvalued by up to 35 percent.

The Housing Ministry is due shortly to publish official house price figures, but these are based on data from appraisers. The Tinsa figures were based on some 340,000 property valuations.

Tinsa Chairman Idefonso Ortega said supply and demand are starting to match each other after record housing starts last year of over 700,000. But he said that demand remained strong, and remained convinced that prices were not likely to plummet. The Tinsa chairman also said the lower end of the market is being underpinned by demand from immigrants.

That assertion was lent weight by the latest mortgage lending data from the Spanish Mortgage Association. Outstanding mortgages at the end of May from the country's financial system stood at €642.312 billion, an increase of 25.2 percent. That was the highest rate of growth since September of last year. Lending in May alone was up 2.2 percent, and up 10.3 percent since the start of the year.

Ortega said a correction was underway in segments of the market which are overvalued. He said while upward pressures remained in parts of the Mediterranean coast and the belt around Madrid, year-on-year growth in prices in regions such as Galicia and Asturias is under 10 percent. Madrid remains the most expensive city in Spain to buy a home, with an average price per square meter of €3,440.