Catalonia Property Sales Fall 20% In Latest Trimester*

Seems the disinflation of the Barcelona (and Spain) real estate bubble is unfolding just as it does in the text books. First the average time on market extends dramatically. It is currently about 6 months—twice what it was just over one year ago.

Home (well, apartments in this case) sales fall as sellers hold out for their asking price. This is very likely what we are seeing in these numbers released today by the Registradores de la Propiedad. Additional factors weighing down prices and buyer demand in this most recent quarter are tightening credit conditions (yes, even in Spain) and double-digit increases in the price of food.

Add on top of that the jobs lost in the construction sector (yes, South American immigrants buy property too), said to possibly approach 22,000 lost jobs in Catalonia alone, and eventual but inevitable losses of jobs of property agents and ancillary home improvement sectors, and suddenly you've got yourself a self-perpetuating downward spiral.

To be sure, prices will not fall immediately. And at least one dreamer, Spain's ministra de Vivienda, Carme Chacón, quoted in today's news, comforted herself with statistics pointing to continuing price appreciation albeit what she estimates to be a more earthly 5% for this year.

But this observation, alas, is the last refuge of those determined to cling to the fantasy that the party can go on. The last 2 steps in the unraveling of a speculative bubble are the slow, begrudging price cuts on the part of a few owners who have no choice but to sell. Then all hell breaks lose as los demás realize that they need to get out while the gettin's good. And a competitive round of price cuts—not to mention repossessions—sets in, the bottom of which only time will identify.

But don't expect this to happen overnight. The first round of officially tallied price cuts are unlikely to show up in government statistics until spring or summer of 2008. After that, it's anyone's guess how fast the air rushes out.

While Catalonia was near the top of the list of sales declines, other regions experienced even greater stalls:

Cantabria -27%
Canarias -21%
Catalonia -20%
Valencia -18%
Galicia -17.5%

No word on Castille-La Mancha. Will look for that figure.

*Doesn't immediately make sense that these numbers would be for the 2nd quarter (trimester, as they call it here) and not the 3rd. I will also try to make sure this wasn't a typo in my source, www.diariometro.es