House prices to continue to fall in Spain

The Central Bank in Spain is predicting that prices in the country will continue to fall in the New Year thanks to a glut of unsold housing.

According to the financial body, there are between 700,000 and 1.1 million properties in Spain that remain unoccupied and on the market, Bloomberg reports.

Added to this, a spokesperson from the bank explained that coupled with changes to the tax system in Spain, home values are likely to continue on their downward spiral.

"We will see a process of gradual absorption of accumulated excess supply, which will be slow and mean that housing investment will not contribute to the growth of activity in the near future," the banking regulator said.

Official government statistics put the current drop in house prices at around 13 per cent from the market's peak in the first quarter of 2008.

Indeed, new-home construction has also fallen to just 137,000 in the 12 months through September compared to 750,000 units at the height of the market in 2007.

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