Sales are in freefall, and bad debts are on the rise in the Spanish property business. The default rate of developers surged to 4.57% at the end of the third quarter, reveal new figures from the Bank of Spain. Total outstanding bad debts attributable developers now stand at 14.4 billion Euros, 14 times more than a year ago, and close to 30% of all bad debts outstanding in Spain.

Spain’s regional savings banks, or cajas, have the biggest headache thanks to their lax lending policies with local developers. Savings banks have a default rate of 5% on their loans to developers, compared to 3.8% for banks.

As to be expected, constructors are also having a terrible time paying their debts, thanks to the close relationship between them and developers, who tend to be their clients. Debts in arrears attributable to constructors have risen to 5.4 billion Euros, the second highest level after developers.

But the Spanish real estate sector isn’t alone in its deteriorating credit profile. As the Spanish economy heads towards recession arrears are rising across the board, and only debt collectors are enjoying themselves. Overall bad debts have tripled in a year, to 54.2 billion Euros, or 2.91% of all debts.

The Bank of Spain recently warned that bad debts will continue rising, forcing banks and cajas to dedicate more of their funds to bad debt provisions. That means less money for lending to consumers, business and home buyers, reinforcing the economic downward spiral.