GLUT: Fewer new homes for sale than previously thought

Spanish new homes inventory. Source: Tinsa

Spanish new homes inventory. Source: Tinsa

A new study by the valuations company Tinsa finds that there are currently around 390,000 new homes on the market, less than previously thought.

Tinsa calculate that 1.56 million new homes have been finished since 2008 (6% of the housing stock), of which 389,000 (25%) have yet to find a buyer.

The map above gives a visual representation of how the stock is distributed nationally, and how much of it is located on the coast (click map to enlarge).

What is immediately obvious, is that most of the excess new homes inventory is concentrated around big cities like Madrid, and on the Spanish Mediterranean coast, where many homes were built with second-home buyers in mind, including foreign buyers.

Spanish new homes inventory. Source: Tinsa

Spanish new homes inventory. Source: Tinsa

The table on the left (click to enlarge) shows the unsold inventory by province, and in the right hand column the inventory as a percentage of the total built (sold and still for sale).

80% of the new home glut is located in just 900 of Spain’s 8,000 municipalities.

Madrid, Valencia, Murcia, Barcelona, and Alicante are the provinces with the biggest stocks, whist Andalusia is the region with the biggest inventory (17% of the total).

The provinces with the greatest proportion of unsold homes as a percentage of the total built are Almeria, Cuenca, Castellón (home to the Costa Azahar), Toledo and Murcia. These are, arguably, the most problematic provinces.

Tinsa estimate the stock will have disappeared in 2.5 years time on average at current rates of sale, varying from 1.2 years in provinces with the lowest stock/sales ratio, to 4.5 years in the worst cases.

Tinsa also reveal that developers own just 14% of the unsold inventory, most of the remainder having ended up on bank balance sheets.

+ Read report by Tinsa (in Spanish)

OTHER ESTIMATES

The actual size of the glut has important implications for the Spanish housing market and economy. The bigger the glut, the longer the market will take to recover, the longer builders will be kept out of business, and the longer the banks will take to purge their balance sheets.

Compared to other sources, Tinsa’s estimate of the size of the glut is more positive for the market, though there is a risk of comparing apples with oranges. Tinsa focus on the 1.56 million homes finished since 2008, whereas other sources do not make that distinction, so may include unsold homes finished before that date.

That said, the most recent figures from the Government (Fomento) estimate 535,734 unsold new homes on the market at the end of 2014, though a percentage of them will have sold since then.

Government (Fomento) estimate of excess new housing inventory / glut

Government (Fomento) estimate of excess new housing inventory / glut

During a conference “Economic perspectives for 2016 and real estate sector trends” organised by appraisal company Sociedad de Tasación (ST) and the Asprima Madrid developers association, Juan Antonio Gómez-Pintado, head of Asprima, said the stock stands at 460,000 homes today, but will shrink by 25% to 350,000 next year.

He forecast that Madrid and Barcelona will have no excess inventory, with less than 10,000 homes available in 2016 between them (5,800 in Madrid, and 4,300 in Barcelona).

Gómez-Pintado says Spain will need to build 140,000 new homes per year, 30,000 to 40,000 in Madrid alone.

CLOSER TO STABILISATION THAN RECOVERY

Speaking at the conference, Juan Fernández-Aceytuno, head of ST, said the sector is “closer to stabilisation than recovery.” He also said the recovery, when it comes, will be at different speeds.

Talking of the property-refurbishment business, Fernández-Aceytuno said “the first thing that needs to be reformed is the legislation, because doing building work today is an exercise almost in science fiction.”

More optimistic was Oriol Aspachs, head of research at Caixabank, who said “the real estate sector adjustment is over,” and talked about entering an “expansive phase.”

Referring to hotspots like Barcelona and Madrid he said “in the coming quarters either we see an important rebound in investment in those places, or there will be a rise in prices.”

“We might even see very positive surprises in coming quarters in some regions,” he added.

Comments

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One thought on “GLUT: Fewer new homes for sale than previously thought”

  1. David

    Yet again different sources quote completely different figures in Spain, it’s very hard to believe what is correct and new homes in this case are but a small fraction of the total number of homes for sale and as sales happen more will come to market. Acuna said existing stock of 1.6 million will take 10 years to sell. Have lost count of the number of false dawns in the last 6-7 years.

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