March 27 (Bloomberg) -- Prices for Spanish homes fell 3.4 percent in the first quarter from the previous three months as the euro area’s fourth-largest economy shrank and reduced mortgage lending crimped demand, according to Idealista.com.
Sellers cut asking prices for existing homes by an average of 2.9 percent in Barcelona, 1.9 percent in Madrid and 2.2 percent in Valencia, Idealista, Spain’s largest property website, said in an e-mailed statement today.
“Prices have continued to fall due to difficulty in obtaining mortgage financing,” said Fernando Encinar, co-founder of Idealista. “Legislation passed by the government in February to push banks to provision for real estate will result in similar declines over the remaining quarters of the year.”
Prime Minister Mariano Rajoy is battling to turn around a slump in the real-estate industry. His government forecasts an economic contraction of 1.7 percent this year that will push Spain’s unemployment rate, the European Union’s highest, to 24.3 percent. The government passed a decree in February forcing Spanish banks to make deeper provisions for losses linked to real estate in an effort to push down prices and boost sales.
Lenders, which have about 175 billion euros of what the Bank of Spain terms troubled property assets, will have to take about 50 billion euros in provisioning costs or capital charges under the government plan.
Since peaking in 2007, home prices in Barcelona, Madrid and Valencia have fallen 29.6 percent, 21 percent and 30 percent, respectively, Idealista said. Idealista based its findings on the analysis of 271,763 existing homes for sale across Spain.
Spanish residential mortgages fel1 for the 21st month in January, dropping 41.3 percent from a year earlier, the National Statistics Institute in Madrid said in an e-mailed statement yesterday.
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