Spanish "Burbuja" Worries Economists, ECB
This story about the Spanish housing market sounds familiar to the US. "'If you go back to the mid-1980's, Spain has had the most rapid price increase in housing of any large country in the world,' said Michael Ball."
"As prices continue on their vertiginous path, however, Spaniards are starting to talk about a 'burbuja,' Spanish for bubble."
"'Housing-price inflation is the first indication of a monetary policy that is too expansionary,' said Jörg Krämer, the chief economist of the HVB Group in Munich. 'If we get a bubble, there is a high risk it will burst.'"
"In February, the European Central Banks' president, Jean-Claude Trichet, warned that 'the combination of ample liquidity and strong credit growth could, in some parts of the euro area, become a source of unsustainable price increases in property markets.'"
"Second homes also fuel the Spanish market. 'If there's going to be a crash, it's likely to be in these coastal areas,' Mr. Ball said."
"With this atmosphere of euphoria tinged by foreboding, Spaniards are like partygoers with one eye on the clock. Storefront real estate brokers have sprouted up all over Madrid, peddling everything from dingy apartments for $189,000 to elegant villas for $3 million and higher."