Double Dip warning on Spain's house prices

House prices may still be falling in Spain, but Spanish bank repossessions are selling well because they often come with heavy discounts and generous mortgages – up to 90% in some cases. In the UK, prices are bumping along on the bottom, mortgages remain hard to get and sales are showing few signs of recovery.

Two markets closely linked by large-scale tourism and the home buying bubble that lasted from 1999 to 2007, but what does the future hold?

Despite signs of stabilizations, many European property markets could be facing a new drop in prices in the next year, according to a new study.

With the notable exception of Ireland, price drops have slowed in most European countries, including France, Italy, Spain and The Netherlands, according to Standard & Poor’s, the credit ratings agency. Prices are even rising in the U.K., the agency notes.

France “leads the pack” with an 18.5 percent overvaluation, while Spain could be due for another 12 percent correction before the market “regains long-term equilibrium.” The Bank of Spain has long warned that house prices were 25% over valued, but currently some deals offer 50% discounts of the latest valuation.

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