A recent article in the Spanish daily El Pais shed some light on the problems besetting Spain’s property market.

One third of the 1.8 million properties built in Spain since 2005 remain unsold, swelling the stock of newly built properties languishing on the market to almost 650,000. In the region of Castilla-La Mancha, 69% of properties built since 2005 are still on the market, and in Murcia and the Valencian Region, more than 50% of newly-built properties have yet to find a buyer.

These finding comes from new research by Julio Rodriquez, an economist at the University of Alcalá de Henares. Comparing the number of new houses completed between 2005 and February 2008 (1.86 million) with the number sold in the same period (1.22 million) Rodriquez argues that 640,000 newly built properties – around one third of the total built – have never found a buyer.

“The stock of unsold properties just gets bigger because there are still a lot of new developments under construction. It’s possible that the stock has already grown to 750,000 unsold properties,” Rodriquez told El Pais.

According to the association of developers and constructors of Spain (APCE), sales by developers have fallen by 60% since last September.

Coastal and mountain regions, with a high percentage of holiday homes, have been hit hard. 50% of new builds in the Valencian Region and Murcia are stuck on the market. But the crisis of unsold new properties is also a big problem around cities like Madrid and Barcelona. 40% of new developments in and around Barcelona are still looking for a buyer.

According to the article, the worst is yet to come. Planning approvals and housing starts are diving, but the number of new properties coming onto the market is still rising, whilst sales have collapsed. “The big difference compared to previous crises is the spectacular oversupply of property, to which you have to add all the properties that investors are trying to sell,” says Gonzalo Bernardos, a professor at the University of Barcelona.

Seseña leads the way down

Seseña, in Toledo province, Castilla-La Mancha, is a classic example of how badly wrong the Spanish property boom has gone.

Seseña is a massive and desolate new development of 13,000 properties that has largely been sold to off-plan investors. So far only 2,500 properties have occupancy licences, and only 750 people live on the development, which feels like a ghost town. Investors desperate to sell are offering significant discounts with little result, other than undermining the developer’s sales efforts.