Housing sales have dropped 40%, the biggest downward plunge since 2004. Laggins sales are mostly the government's fault; they decided to raise the VAT tax and suppress home buyer tax credits. Now potential buyers are postponing their decisions to buy until the Partido Popular (PP) comes to power and re-establishes the tax credit.
It is all for naught that Zapatero is trying to re-establish demand by lowering the VAT tax for home buyers. The PP defused him by saying that they would keep it the same for another year. So both will try to keep intervening in the markets and have an obvious impact.
Potential for further price drops will not offer much help in a stagnating economy and a banking system that is not granting secure mortgages for the homes in their portfolios.
