Spanish home sales see sharp fall in fourth quarter

Spanish home sales fell in the last three months of 2011, hitting their lowest level since 2007, as the nation continues to struggle with recession. House prices fell at an annual rate of 11.2% last year, the Instituto Nacional de Estadistica said, a drop of almost four percentage points more than the previous quarter. Second-hand house prices also saw a steep drop of 9.6% in the quarter. Spain has struggled since the 2008 housing market crash. The nation, which currently has the highest unemployment rate in Europe at 22.8% - which is more than twice the average unemployment rate of the eurozone. Five million people are out of work and more than 50% of young people cannot find work. House prices in Madrid fell the most in the quarter, 15.7% year-on-year. The region of Catalonia had the second-biggest falls, official figures showed. Times have changed Because of the eurozone debt crisis and to avoid being bailed out, the country has implemented austerity cuts to reduce its deficits and lower its debts. Spanish Prime Minister Mariano Rajoy recently said the European Union's target for cutting the budget in 2012 - to 4.4% - would be missed. The deficit would be 5.8% of GDP, he said. This is a massive turnaround from when foreigners piled into Spain and borrowed heavily to buy holiday homes. In the years between 2004 and 2008, the average house price in Spain rose 44%. Construction represented about 16% of GDP by the end of the boom, while the unemployment rate was down to 7.95%. However, rising house prices fuelled the sub-prime mortgage market, leading the Spanish to borrow more as they struggled to get on the housing ladder. The downturn has seen repossessions of Spanish properties rise 32% in the past year. The Bank of Spain has said it expects the economy to shrink 1.5% in 2012.