Spanish Property Overhang Shrinks
June 16th, 2009
614,000 completed new homes left unsold, Analysts say number less than forecast, Another 627,000 still in construction
Spain had 614,000 new homes sitting unsold at the end of 2008 — lower than most analysts’ estimates — according to the first major survey of Europe’s most over-stocked home market.
Almost half of those are clustered on the over-developed coast according to the housing ministry study, which surveyed or visited 6,810 real estate companies — around 70 percent of a sector that is shrinking fast in the face of one of Europe’s most savage property downturns.
The survey is the first attempt by any public or private body to pin down the size of the stock of unsold Spanish property — estimated at over 1 million homes by some economists — using a methodology similar to the respected Royal Institution of Chartered Surveyors (RICS) study of the UK market.
“The survey looks good to me, very representative and well designed,” said Jose Carlos Diez, an economist with Intermoney in Madrid. However, he added the figure was still represented a serious challenge despite being below many estimates.
“You should not lose perspective, the figure is less than expected, but 600,000 homes is still a lot of homes.” At the current rate of sale, the stock will take around three years to be run down while Spain’s housing market — the former motor of economic growth — suffers a hangover after a 10 year boom. In that time prices tripled and huge tracts of the coast in particular were disfigured by rows of uniform apartment blocs.
In 2007 alone Spain built 690,000 new homes — as many as France, Britain and Germany combined — even though underlying demand is normally less than half that. Now hundreds of builders are going bust every quarter amid a 34 percent dive in sales in the year to date and their assets clog up banks’ asset sheets.
The survey published on Friday also notes that Spain had 627,000 homes in the process of construction at the end of 2008 — 70 percent of them almost finished and 39 percent already sold.
Story from Reuters
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