Interviews

Has the property bubble burst?

Without a doubt. The majority of developers are selling less than 20% of what they sold during the first months of 2006. At the same time, prices are dropping significantly: more than 20% in some cases. There are already some developers selling apartments for the mortgage value and even a few that are setting prices below their cost. The latter, who are losing money, make the following reflection: “I prefer to lose a little now than a lot a year from now.”

At what point are we in the property crisis?

At the beginning. A property crisis has never lasted for only two years. The two most recent ones lasted from 1980 to 1985 and from 1992 to 1997. Notwithstanding, the current crisis is of much greater importance than either of the two previous ones. We are faced with the longest and deepest property crisis in the history of Spain.

What will happen to house prices then?

They will continue to fall in the coming years. There will be cases in which prices will fall by 50% with respect to end-of-2006 levels. In other instances the decrease will be only 20% or even less. Nevertheless, almost all housing will fall in price. Of course, the price of luxury housing will drop as well. I assure you that millionaires are not idiots and do not give their money away.

And mortgages?

It is likely that interest rates on mortgages will drop considerably in the second half of the year. Of course, this is providing that food and petroleum prices do not keep going up and that German economic growth is mediocre.

An important part of the domestic budget goes to pay the mortgage. Will families’ debt increase?

Quite the opposite. Foreseeably, in coming years savings will increase. People will be afraid and they will put money aside in case they become unemployed or have their extra income dry up. In the near future, the main economic objective of families will be to reduce their level of debt to keep from losing sleep over it.

As a specialist, when do you think we should rent and when should we buy a home?

It’s very simple: if you believe that housing prices will increase considerably in the near future, this is the time to buy, since tomorrow the apartment will be more expensive than it is today. On the other hand, if you believe that prices will go down or that the market value will stagnate, the correct action would be to rent because in the future you will be able to buy cheaper. Notwithstanding, in most instances, if the couple has sufficient purchasing power; their decisions are made for social reasons rather than economic ones. Many people equate home ownership with security, durability and a consolidated family situation. On the other hand, rental housing is equated with insecurity and temporariness. This belief is an inheritance from the previous generation.

On occasions, you have said that the Spanish economy is ill. What is needed to redress the situation?

We are going to have to take measures that are harsh and unpleasant, but essential to keep unemployment under control. Among others, these measures include a reduction in corporation taxes, a decrease in social security taxes paid by companies, greater flexibility in the labour market and an increase in IVA (value-added tax). Moreover, it will be necessary to transform the distribution system of products and services in Spain to avoid situations of monopoly or oligopoly and, in this way, eliminate the traditional and very harmful inflation differential that Spain has in relation to the euro area.

Is the Spanish economy overly dependent on the construction sector?

Excessively. One piece of data will make this dependence clear: in the 2006 fiscal year in Spain 3, 5 and 7 times as many dwellings per inhabitant were built than in the United States, the United Kingdom and Germany respectively.

Will we be able to handle the unemployment coming from this sector?

No. This is a fallacy created by economists who have either sold out to those in power or who have scant knowledge of the subject. Statements such as “Now that things in Europe are going worse, our exports will increase” or “Spanish companies will take advantage of the drop in their sales and income to invest more in new plants and equipment” are laughable. Looking at things optimistically, I can tell you right now that between 2008 and 2009 unemployment will increase by one million people.

To what degree is the current economic situation the result of our government’s policy and to what degree a result of the international context?

The international context is what marked the change of the economic cycle in Spain . This notwithstanding, the arrival of a large-scale economic slow down and the probable entering into recession were a foregone conclusion because of the inadequate policies of the two main Spanish political parties, PP (January 2003 – March 2004) and PSOE. It’s really quite elementary. If a country increasingly lives beyond its possibilities (has a high current account balance deficit), there comes a time in which foreign lenders lose confidence and, consequently, do not want to lend them more money. If this occurs, financial institutions have no money to lend to families and companies, the economy runs out of “gas” and, thus, the GDP (gross domestic product) grows very little or not at all.

When did you first come into contact with the UOC?

When the undergraduate bachelor’s degree in Business Studies was created. I was part of the pilot group of external professors. At the same time, along with two other colleagues from the Department of Economic Theory of the University of Barcelona we elaborated, if my memory serves me correctly, the first teaching module of the UOC, that of Introduction to Microeconomics.

What do students ask you most often?

The most typical question is “What subjects should I enrol in this semester?” All the same, they generally ask me this during the registration period. Throughout the semester various questions come up. These range from asking me to act as mediator with a tutor or consulting with me on questions regarding their current and future work, to asking me whether their system of study is adequate or not. As an anecdote , r ecently, a growing number of students have asked me if it is a good time to buy a home.