According to the BBVA, the second largest bank in Spain, the slow pace of economic recovery and the scale of job losses are causing people to put off long-term investment decisions in Spain, curtailing demand for housing.

BBVA’s economic research department also found that the Spanish real estate sector, unlike most other European nations, is significantly out of balance in terms of volumes, and less so on price. The research department pointed to property price corrections of around -10% in 2009 and -12% in 2010 in nominal terms. In all, prices are expected to decline by around -30% from the peak. The rental market is key to the absorption of unsold housing developments.

According to BBVA’s research department, the measures put in place by the Spanish Government, such as the announced tax deduction in housing purchases, could prove a significant and effective counter-cyclical measure. Globally, despite the raft of measures being put in place by governments, the lack of precedents for measures of this scale makes it hard to pinpoint a potential recovery in 2010.

Lower inflation and interest rates and Government-sponsored stimulus measures are helping household finances. This together with falling housing prices, should breathe some life into demand for housing, according to BBVA’s economic research department.