House prices fall sharply for the first time since 2007

First-quarter decline of 3.5 percent caused by changes in tax laws

House prices in Spain declined at a speedy pace in the first quarter of this year, showing the biggest drop since 2007, when the country's housing bubble burst and devastated the economy.

In a statement, the National Statistics Institute (INE) said that prices during the first quarter fell at 3.5 percent, or a 4.1-percent annual rate.

The sharp decline is being blamed on the government's elimination of tax incentives for home purchases, which was part of Prime Minister José Luis Rodríguez Zapatero's cutback package, introduced to try to rein in the gaping deficit.

The INE also blamed last year's hike on valued-added tax (VAT), which has discouraged many buyers. Only in 2008 did house prices come close to similar falls.

In April, figures supplied by the Public Works Ministry showed that in the first quarter of the year house prices fell by a 2.5-percent quarterly rate, and a 4.6-percent annual rate.

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