Spain, Portugal, Greece and, to a lesser extent, Italy, all immersed in the European debt crisis, are experiencing second-home property price declines. The countries' housing markets have been battered by escalating debts, recent austerity measures and deep uncertainty in the financial markets. A glut of new homes built in boom times in many popular vacation areas is making matters worse, as rental demand falls and financing requirements become stiffer. As a result, asking prices for second homes have fallen 15% to 30% in recent months. In less fashionable areas, prices for some properties are as much as half off what they were two years ago.
"Price expectations have finally adjusted to the new reality. People are finally accepting that the game has changed," says Joachim Wrang Widen, director of Christie's International Real Estate in Europe.Obviously, perma-bull talking heads and journalists present these facts with a bullish and positive view: it's time to buy! And you'll find many "investors" story about how great the opportunity is, once the price has been slashed by 18%. Do not listen to these! Fortunes will be wiped out before we hit the real bottom, somewhere 70 to 90% lower than where we are today.
It took a long time for the shift in mentally to happen, but things will go accelerating from here. Denial is about to end in these countries, and losses to be realized. In which cases, the banking sector, already against the wall, might finally collapse.
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