Oversupply ''threatens house prices in Spain''

House prices in Spain might drop even further unless the government reduces the number of building permits it issues, an industry expert has said.

Remi Gashi, a mortgage consultant with Savills Private Finance, explained that property prices in Spain might fall as a result of over supply in the market.

Ms Gashi was commenting after retail analyst Verdict Research suggested that the market for property in Spain had "gone into reverse" following "years of rapid house price inflation".

However, Ms Gashi said that the real issue was one of oversupply.

"If they continue oversupplying, then eventually the prices will be pushed down. I think that this will teach them a lesson," she explained.

"Last year, I think they issued something like 900,000 permits for new builds. That''s millions of properties – where is the market for that?"

Ms Gashi added that anecdotal reports suggested that demand for property in Majorca has remained "pretty strong" while interest in the rest of the country has dropped.

Recently, HiFX suggested that the strength of the Euro meant that interest in buying property in Spain and France has decreased in recent months.