The Property Market in Spain could Learn a Lot from Ireland

Costa Blanca

In a brilliant article by John Müller, deputy director of the El Mundo newspaper, he criticizes how Ireland has managed to isolate the problem of falling property prices after its own bubble popped while Spain continues to maintain prices artificially high due to action, he says, by the banks.

John Müller says that Ireland has recovered from the economic crisis in part because of the way it tackled the real estate issue. The country also experienced a “large bubble” as property prices quadrupled between 1997 and 2007. The writer explains that prices in Ireland are falling fast (down 12.5% in the first six months of the year and down 57% from their peak in some parts of Dublin), while the same is happening in Spain in slow motion. He points out that property prices have dropped 22% since their peak according to the Bank of Spain (Banco de España) and only 16% according to the Ministry of Public Works (Ministerio de Fomento).

The leader from El Mundo says that the key in Ireland was “enabling offer and demand to operate almost without interference”. He recalls how the Irish banking sector was rescued by the State and how a “bad bank” was also created in which to put real estate assets on ice so that once the losses had been assumed, the property prices would not affect the results of the banking sector.

John Müller accuses the Spanish banking system of “artificially blocking” a fall in prices and the Government of turning a blind eye to something it is fully aware is taking place.


He is of course 100% correct but the Spanish banks with a history of trying to artificially help keep losses to a minimum and actually creating distorted accounting will have to be dragged kicking and screaming to accept Ireland’s medicine.


The formation of the banks own real estate companies to help dispose of their assets was another disaster. Also the bank’s reluctance to deal with the international agent market place is inherently stupid. It’s only now some banks are seeing the errors of their ways but still but obstacles in the way of the companies and people who could help them sell their real estate.


If the 2012 Euro crisis continues then the banks in Spain are going to have to change their attitude big style or this housing crisis will continue for years.


December 22 will see a new Government in Spain and it will be very interesting to see how they tackle the current crisis.
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