More than 35% of the 60,000 real estate agencies opened in Spain will face economic difficulties next year. Experts even think that three fourths of the sector - 75%- could disappear in the medium term. The main reason being an 11.5% decline in demand in the real estate sale sector during the last 12 months.

During the first three months of 2007, results of cement consumption show some unfavourable data regarding production, which, according to some analysts, would be a clear symptom of the construction slowdown in this country.

During the first quarter, sales in Spain have decreased by 23,000 houses, compared to the same period last year, which proves the slowdown of the real estate sector.

This decrease in sales could cause one in three real estate agencies to close down in the coming months, which would mean the closing of 18,000 out of almost 60,000 offices in Spain, according to the Professional Association of Real Estate Experts (APEI).

The slowdown of the housing sector will mainly affect small real estate agencies opened after the sector release in 2000, which were a result of the housing boom. These are offices with only one employee and a telephone where there is no professional staff specialized in the real estate sector.

On the other hand, we should not forget the explosion of the Internet, as this has become a handy, fast and cheap tool to look for a house. Thus, customers are able to save up to 5%, the percentage usually taken by the agency when acting as an intermediate in the house purchase.

Another influencing factor for the recession of real estate agencies regarding the sale of houses is the increase in the interest rates.

There is a lot to choose from, prices are well above the economic capacity of the customers and they need to think about it for months before deciding to purchase a property.

Another element that can explain what is happening is the price. Many people think they have a castle so they expect to earn a fortune for something for which they pay a fourth of the price that they are selling it.

The regulation of this sector planned by the government and some of the Autonomous Communities, together with the application of some minimum requirements to the real estate practitioners, will probably cause a radical change to happen in the next months.

Those who can buy are now thinking it over.

People wait because they think they could get a bargain but that is not true, because before owners are willing to sell cheap, they opt to rent their properties while waiting for the market to recover. But all of this depends on the circumstances because the mortgage price is increasing and, according to financial experts, it will keep increasing.

Since 2001, interest rates have only increased. Furthermore, we should take into account the crisis suffered in the U.S.A. regarding the high-risk mortgages. By now, the Central European Bank has been forced to inject large amounts of money into the monetary system in order to avoid such a crisis.

In May of this year, mortgages in Spain were constituted for an average amount of 150,810 euros. According to the International Monetary Fund, due to the low interest rates, many citizens made purchases exceeding their financial capacity and they did not properly calculate what the consequences might be. Within this category are included those who asked for more than 85% of the property value and those who pay more than 55% of their earnings.

One option for many Spaniards looking for their first home is to rent. Although in Spain there is a great tradition of purchasing a house, as only 11% of the population live in a rented home compared to 30% in the rest of Europe, renting has some advantages.

BBVA’s survey service has produced a report on the real estate sector that predicts that home prices will not increase in 2009. This situation, according to the study, will be preceded by a period of progressive slowdown. In the same way, the bank rules out any type of scaremongering about the adjustment of the sector. BBVA predicts that the rate at which prices will increase for the following years are 5.9% in 2007, 1.4% in 2008, and 0% in 2009.

Conclusions

If you have a property and you want to sell it, you should know that the longer you wait, the lower the price you will receive. If, however, you want to buy, you should wait, meanwhile, watching the decline of this sector. Let’s hope you’re interested in renting before buying, because all of the signs point to a collapse of the real estate sector in Spain.

On the other hand, we can not forget that at this moment there is a tourism crisis in the Canaries. Keeping in mind that the driving force of the economy in the Canaries is tourism, this will make it even more difficult to sell real estate, because currently there is an abundance of primary houses, apartments, and vacation homes for foreigners that come to the Canaries to retire.