The glut of newly built homes on the market will take the market 2 and a half years to digest, according to data from the Institute of Construction Technology (Itec). With approximately 1 million new homes on the market, any property finished by developers in the next 2 and a half years will join Spain’s inventory of unsold new homes.
Spain’s housing glut is not uniformly distributed around the country, however. According to Itec, the real problem is on the Spanish coast, where properties were built for foreign buyers, predominantly British, who have now almost disappeared from the market.
Thanks to the long lead times and inertia in the construction business, there will be more than 600,000 construction completions in 2008, despite a severe slump in property sales, which helps explain why Spain’s new housing inventory is growing so fast. “In 2008 there has been a lot of work, almost as much as in the best years of the boom,” says Josep Fontana of Itec, quoted in the Spanish daily La Vanguardia.
Itec forecasts, in a report for Euroconstruct, that the number of finished homes will fall to 300,000 in 2009, a 50% drop in output, before stabilising with a 2% fall in 2010. That would take residential construction levels back to where they were in 1996 and 1997, before Spain’s real estate boom kicked off.
Even if Spanish residential construction falls by 50% to 300,000 units in 2009 that is still significantly more than the UK’s output in the boom years. Given the state of Spain’s housing bust and its economy, it is hard to see how Spain could sustain this.