Finance linked to construction and the housing industry has been the most dynamic element of credits and loans granted by Spanish financial institutions. In fact, 60 per cent of the credit granted to the private sector residents is related to the activity in the real estate sector. The rise in the interest rate during the last two years, the over-valuation in house prices, the evident excess of housing supply and the growing debt levels of Spanish families are responsible for ending the period of long and rapid growth in the sector. In the face of the resultant uncertainty the most optimistic analysts predicted a smooth slow-down with a limited impact on the financial system and the growth of the economy. The subprime mortgage crisis that arose in the summer of 2007 has set off a re-evaluation of the credit risk and this has brought a tightening of the terms for granting credit. A contraction in the supply of credit does not guarantee that the slowdown will be smooth. The question lies in estimating the scale of the financial crisis and the crisis in the housing sector, and assessing whether the Spanish financial system is strong enough to face up to this new situation.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.