Spain’s collapsing residential property market is still overvalued, banking experts at Goldman Sachs have warned.
Goldman Sachs analysts said that house prices in the embattled European Union economy need to fall another 10%, according to a Telegraph report.
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They added that that would pose fresh problems for the country’s troubled banks.
As well as claiming that Spanish property is still overvalued despite a 30 per cent collapse, the bank called for a restructuring of the country’s lenders.
The warning comes hot on the heels of dire news on the Spanish economy.
The government said it expects the economy to contract by almost three times more in 2013 than it had previously forecast, forcing Madrid to extend its deficit reduction programme by a further two years.
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By GlobalDataHowever, Goldman economists Andrew Benito and Sebastian Graves said more homeowners could be at risk. ‘Our preferred model values housing based on the relationship between rental yields and real borrowing costs.
Bank lending is falling, Goldman said, but it needs to be withdrawn from bad borrowers and lent to promising businesses to drive growth.
