A place in the sun?

And the rain in Spain jumps out of the drain.

Right now, things in Spain seem to be a lot like the UK, only more so. While we fret about inflation going over 4 per cent, in Spain the 5 per cent mark has been breached. Spanish inflation in July hit 5.3 per cent, from 5 per cent in June and a Eurozone average of 4.1 per cent. But the big concern relates to Spanish house prices.

Over the last ten years, Spanish house prices rose by 175 per cent, but in the second quarter prices fell, the first negative quarter in over ten years. Meanwhile, retail sales recently fell by 7.7 per cent, consumer confidence has fallen off the edge of a steep cliff and unemployment is rising fast. Now Capital Economics has revised its prediction for falls in Spanish houses – it now reckons prices will fall by a total of 25 per cent.

Its European economist Ben May said: “The downturn in the wider Spanish economy will not be short lived. With house prices set to fall sharply throughout 2009, we doubt that there will be any meaningful pick-up in GDP growth until the start of 2010 at the earliest.”