The European housing market hasn’t stopped attracting British buyers, with Spain as the top hot spot, according to The Independent.

Spain may be a surprise entry given that it is still struggling with high unemployment and a shrinking economy, but with average house prices falling by 8 per cent in the 12 months from September 2008, this may be the time to pick up property on the cheap.

And while Spain has been going through turbulent times, it is nevertheless still a firm favourite as a lifestyle holiday destination, despite all the bad press of late.

The British love affair with Spain shows few signs of abating. Spain came out as the top destination for international money transfers at the Post Office, as well as the cheapest place to live within the eurozone, according to its holiday costs barometer.

The full story: The Indepentent

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House prices in Spain fell 6.8 percent in the March quarter, compared with the same period in 2008. On a quarter-on-quarter basis prices declined by 3 percent — the fourth consecutive fall and the biggest yet.

House Price Index March 2009

Credit Suisse analysts said supply and demand were out of kilter, with one in six people out of work and 1.5 to 2 million houses sitting unsold. The average Spanish home costs 7.2-times the average household’s annual income, against 4.6-times in Britain and 3-times in the United States, the bank said.

‘Unemployment is fast increasing and that is a leading indicator of future delinquencies in the banking sector and potential declines in house prices,’ the Swiss bank said in a note after the figures were published.

Most industry experts say government data underplays price declines in the Spanish property market, which saw a 39 percent fall in the volume of sales in January, year on year.

However, to put Spain’s price drop of 6.8 percent in perspective, house prices in Ireland, whose housing boom is most frequently compared with Spain’s, fell 9.7 percent year on year in February — the 24th consecutive month. In the UK, prices had dropped 12.3 percent over the same period.

‘I think we are all aware that prices had not adjusted to their true value. This tendency shows the adjustment,’ Anunciacion Romero, housing ministry director general told journalists. She declined to say were prices would go from here.

A recent Reuters housing poll of Spanish and foreign-based economists found that on average prices were expected to fall 32 percent from their 2007 peak.

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A Spanish property expert has given an encouraging assessment of future prospects for the country’s property sector.

Martin Dell of Kyero.com claims that, while buyers are likely to remain “very price conscious” over the next 12 months, there will be an increase in the number of people investing in Spain next year.

He believes the Spanish property market will be helped by a “more buoyant European economy” in 2009, resulting in an “improved flow of credit and renewed optimism in the property market”.

Mr Dell explains that recent events in Spain’s financial sector, such as the Metrovacesa debt for equity deal, demonstrate that financial analysts in the country envisage a turning point for the economy.

“Next year, I see an opportunity for European buyers to acquire Spanish property at bargain prices,” he comments.

The Sanahuja family, which controls over 80% of the capital in Metrovacesa, has agreed to give creditors a 54.75% holding in the company in exchange for the cancellation of debt worth 2.1 billion euros.

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