We started following the Spanish market actively this spring as the real estate market there began to decelerate at a rapid pace. The collapse was preceded by years of massive speculation with new home construction hitting an annualized 700,000 by Q3 2007. The housing boom helped Spanish household debt balloon -in December 2002, total mortgage loans equaled 52% of GDP but by Q2 of this year it exceeded 99.5%. The bursting bubble and subsequent fall-off in new construction has predictably spurred higher unemployment with a decade record rise in Q3 to over 11%.
We are revisiting our work on Spain this week as part of our continuing work to explore relative value opportunities with the EU.