Spanish home prices down 14 per cent in worst decline on record

Spanish home prices fell the most on record in the second quarter as the euro area's fourth-largest economy shrank and a reduction in mortgage lending crimped demand for property.

The average price of homes declined 14.4 per cent from a year earlier, the most since the measurement began in 2008, the National Statistics Institute said yesterday. Prices fell 3.3 per cent from the previous quarter.

"The data reflects a significant drop and confirms that prices haven't bottomed out yet," said Fernando Encinar, co-founder of property website Idealista.com.

"Only homes that are heavily discounted will sell, as access to credit has completely dried up for potential buyers."

Spain, which forecasts an economic contraction of 1.7 per cent this year, is in its second recession in three years. Its 25 per cent unemployment rate is Europe's highest and has diminished lending for residential real estate.

House prices more than doubled in the decade through 2007 before turning negative in the first quarter of 2008, and have since fallen by about 23 per cent, data from the Ministry of Public Works show. Home prices have fallen 32.4 per cent since a December 2007 peak, according to separate data from Tasaciones Inmobiliarias, Spain's largest home appraiser.

The number of Spanish homes sold declined in July for a 17th month, dropping 2.5 per cent from a year earlier, according to the statistics agency. Mortgage lending fell 20.4 per cent in June from the year-ago period, INE data shows.

The government has passed two decrees this year forcing Spanish banks to make deeper provisions for real-estate losses.