Glut of new Spanish homes will take market 2 years to digest

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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.

SPI Member Comments

Thoughts on “Glut of new Spanish homes will take market 2 years to digest

  • polaris-world says:

    Most of this inventory will rely on British buyers to clear it. We need a rise in the exchange rate (currently €/£1.03) to help this process otherwise we will have a period of hesitation as buyers adapt their expectations while hoping the pound will recover.
    Paul Williams

  • It will take a lot more than an improved exchange rate for Brits to start buying in Spain again. First and foremost the buyer must know unequivocally that when they pay their money the house is theirs, lock stock and barrel from that point onwards and for ever more. Legislation must be put in place changing the whole area of house purchase so that it becomes “AS SAFE AS HOUSES” to coin a phrase. Subsequent legislation must not be imposed on home owners so thal a legal property becomes illegaL. Sort all this out and then people might consider Spain once again.

  • On the article: I dont know where the figures come from but the developers association estimates that there are 650,000 new unsold homes – still rather a lot but not the one million guesstimate this seems to be.

    What is not in doubt is that the construction sectors needs to massively contract.

    The real oversupply is around cities AND the coast (but by no means concentrated on the coastal areas). Coastal areas are more widely reported because the prices have fallen faster.

    Also, the buyers will be predominantly Spanish, not British as asserted above. On the coast (Costa del Sol) about 40% of buyers are foreign. Of them about 35% are British. Therefore, it will be the Spanish that soak up the excess suppy (as in the early 1990s when prices last fell).

    In addition, properties cannot be made illegal. They are either legal or not. The illegal properties that we hear so much about were illegal in the first place and are now being ‘legalised’. That is, the town plans are being modified to include the planning infractions.

    What should be of more concern is enforcement. Any planning infraction should be punished immediately and severly if it occurs again. However, market forces are likely to ensure that this does not happen again.

    I hope the analysis done on the property market can be a little more objective, rather than general. Real estate is local and should not be lumped as ‘Spanish property’.

    Guy Marrison
    Marrison Properties

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