The Government's financial reform will push down house prices more this year than any other since the crisis began forecast analysts like Madrid-based R.R. de Acuña y Asociados and international ratings agency S&P.

R.R. de Acuña y Asociados are forecasting price declines of up to 14pc this year, the biggest fall since the National Institute of Statistics began publishing its current house price index.

S&P are forecasting that up to 25pc of mortgage will be under water by the end of the year, up from 8pc in 2010.

The reaction of banks to the financial reforms will be one of the main drivers of price falls this year says Fernando Rodríguez de Acuña, a partner at R.R. de Acuña y Asociados. "Banks are preparing themselves for big losses in the real estate sector," he said, quoted in the Spanish press.

The financial reforms are forcing banks to make bigger write-offs on their property portfolios, which means bigger discounts on the properties they have for sale. That will force private vendors to reduce their prices too.

There has been a recent 30pc surge in the number of vendors dropping their asking prices, reports Idealista.com, a property portal.

It is widely reported in the Spanish press that house prices have already fallen 30pc, though the Minister of the Economy says 35pc.

"We suspect prices have fallen more than 30pc since the peak, though we accept that part of the adjustment has been delayed by lenders who have been accumulating repossessed properties," says Raj Badiani, and economist at IHS Global Insight.

Another problem, according to Fernando Encinar, head of research at Idealista.com, is that investors don't believe the values that banks are giving their property portfolios. The suspicion is that banks are overstating the value of their portfolios.