One in every ten mortgages in Spain has negative equity, in other words, the property is now worth less than the money borrowed. These figures were provided by the Centre of Economics and Business Research (CEBR) in London in a report on underwater mortgages produced for Kelisto.es

At the moment it’s 10.7 percent but by 2015 it will be 11.3% of all existing mortgages.

In terms of mortgage holders, we’re talking about 580,000 people who are either stuck with the property until things improve, or are facing an eviction if they can’t keep up with the repayments. And let’s face it; it will be a long, long time before property prices reach the surreal level that they were when these people took out their mortgages.

The average price of housing properties has fallen by 38.5% across Spain and according to one group of experts, it could fall by further 15.8% in the next few years. In other words, the situation that these half-a-million people are in can only get worse, and their ranks will swell further to the estimated 22% giving a figure of 710,386 negative-equity holders.

When you look at the impact that the present figures have on the economy, we’re talking about a 13,000-million gap between what is owed and the price of the said properties, or if you prefer an average of 22,000 euros for the affected families – that represents an important brake on consumer spending when you take into account the total population of Spain.

Of course, the obvious answer is dación de pago; i.e., if you hand over the keys to the bank, the debt is annulled, which is the case in most First-World countries, though not in Spain. The Central Government has refused to contemplate such a thing, despite a popular petition of 1.6m signatures handed in to the Lower House, so there is no chance of this solution until the next elections.

(News: Spain)