Spanish government argues housing glut will shrink fast

In a drive to reassure international money markets that Spain can deal with its real estate problems, the Ministry of Finance has claimed that Spain’s infamous housing-glut will shrink to a manageable level of 200,000 homes by 2013.

For that to happen Spain will have to sell 900,000 new homes between now and then (300,000 per year), whilst building around 175,000 new homes on average per year. In the chart above, the dotted line forecasts the new housing inventory in 2013.

Some experts have raised doubts that the market will be able to digest 300,000 new homes per year, bearing in mind that resale transactions must also be taken into account.

According to the latest figures from the Government (Fomento) and the property register, analysed in an article by El Confidencial, the net change in the number of new homes on the market over the latest 12 months was a decline of just 30,000, way below Government estimates for the next few years. If that rate continues it will take several years longer to digest the glut.

The Government also produced an analysis of the relationship between price falls and the stock of new homes on the market in different areas.

As you can see from the graph below, which shows the relationship by province (Madrid and coastal provinces in red), housing stocks and price falls are positively correlated. Madrid and coastal provinces, where most holiday-homes are located, tend to have the largest gluts and price falls.

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About Mark Stücklin

Mark Stücklin is a Barcelona-based property market analyst and consultant, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008). He can be reached by email on ms@spanishpropertyinsight.com.