MADRID, Jan 18: Spain’s embattled real estate sector received more bad news on Friday as the government announced that property price-rises last year were the lowest since a boom in the market began 10 years ago.

Property prices rose just 4.8 per cent in 2007, down from 9.1 per cent the previous year and only slightly above the inflation rate of 4.3 per cent, the housing ministry announced.“It is the weakest rise since 1998” when the housing market began to take off in Spain, it said.

The figures show that the real estate market is continuing “the gradual adjustment process, for which we are prepared,” said a senior government official involved in the property market, Rafael Pacheco.

The property sector has been the driving force behind Spain’s economic development in the past decade and contributes 7.5pc to the country’s GDP, according to a study by the BBVA bank. The construction industry also employs 13pc of workers.

House prices rose 12.8 per cent in 2005, 17.4 per cent in 2004 and more than 150 per cent over the period 1996-2006.

The low interest rates that followed Spain’s membership in the eurozone in 1999 fuelled the housing boom as Spaniards took out mortgages to buy homes for the first time or to trade up to a larger house.

But the market has begun to stagnate due to rising interest rates and the international lending crunch that has hit Spain’s credit-fuelled expansion.

Half of Spain’s real estate agencies closed their doors in 2007, according to figures from the nation’s main estate agents’ association API published on Thursday in the El Pais newspaper.—AFP