There’s an interesting report in the Telegraph about fears of a property crash in Spain. Prices of property have apparently peaked and price increases have fallen from over 13% to around 5% over there following a huge amount of building which has led to an over supply of properties.

A building firm in Valencia has seen it’s share value plummet 62% while other companies have fallen between 8 and 11%.

With interest rates rising generally throughout Europe and the likelihood that air travel will become more expensive as more green taxes are imposed it may well be that Spanish property will not be as good an investment in the future as it has been in recent years.

British buyers have flocked to Spain but as the cost of borrowing increases demand is bound to ease. Many have borrowed against their British property to fund holiday homes in Spain so their costs will be rising as the interest rates increase. In another report the Telegraph says that some monetary experts think that interest rates could rise to 7.5%. Now that could really start hurting an awful lot of people with large mortgages and other debts.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

It’s true that there is a great deal of demand for houses and that far more people want to buy than there are houses available. There can be few people who don’t want to own their own home. The demand is there so what stops them? Price and affordability.

If everybody who wanted a house could afford one then the prices would automatically rise to match the demand until a rough balance was reached. If there were more houses than there were people wanting to buy then house prices would drop until a rough balance was reached. It’s a basic supply and demand situation. Read the rest of this entry

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)