Spanish Property Group Loses €2bn

Spanish property group Colonial, which is struggling under huge debts, reported a €2.38bn (£1.9bn) first-half loss as the value of its assets tumbled.

The net loss compared with a profit of €316m a year earlier, as Spain's decade-long property boom ended.

Colonial has written down the value of assets, including €800m for a 15pc stake in construction company Fomento de Construcciones y Contratas (FCC).

The company bought the FCC stake in 2006 for €78 a share. The stock currently trades around €34.

"The rest of the write-down mainly corresponds to negative property valuations and the adjustments registered between the market value and the book value of the company's assets," Colonial said in the statement.

Societe Fonciere Lyonnaise, the French real estate investment trust controlled by Colonial, reported a loss in July of €181m for the first half after the value of its assets declined.

Colonial's property assets were valued at about €10.5bn at the end of June, about 10pc less than they were worth on December 31, according to the statement.

Like other Spanish property firms, Colonial has been hurt by rising interest rates and the global credit crisis. Its shares have fallen more than 70pc this year.

Spanish property developer Martinsa-Fadesa filed for bankruptcy in July, the first major victim of Spain's housing market crisis, prompting warnings of further failures.

Low interest rates that followed Spain's accession to the eurozone in 1999 fuelled a housing boom as Spaniards took out mortgages to buy homes or trade up.

The market began to suffer early last year as rising interest rates and the international lending squeeze halted the expansion.

Spain's economy - the fifth biggest in Europe - has been in crisis for months, with growth sinking to 0.1pc in the second quarter. The government has forecast growth this year of 1.6pc, down from 3.7pc in 2007.

Story from Telegraph.co.uk