There was an interesting article recently in El Pais (Spain’s leading daily paper) entitled “The Coast is now a graveyard of cement” bewailing the over-development of the coast, and asking how long the holiday home market will take to recover.
The article points out that Spain had 997,652 new homes on the market at the end of 2008, of which 47% – almost half a million new homes – were located on the coast. Now that the credit crisis has arrived, and the property market gone into a slump, that glut of new holiday homes is turning into an intractable problem. After all, nobody really needs a holiday home.
“The second home market is suffering the biggest fall in sales,” Pedro Perez, president of the G-14 group of Spain’s biggest developers, told El Pais. “It’s logical, it’s the first thing people do without when they get into difficulty.”
How long will the glut of half a million new homes on the coast take to sell? It’s an important question with huge ramifications for the Spanish economy.
At 2007’s sales rate the glut on the coast will be mopped in about 16 months. But at today’s rate, it will take close to 5 years, points out the article. That’s a big difference.
But according to Gonzalo Bernardos, a housing market expert at the University of Barcelona, there are some glimmers of hope. Sales of holiday homes in May and June have been “surprisingly” good thanks to falling prices and interest rates that have delivered discounts of 40% to 50% in some areas. As a result, it is likely to take 3 and half years for the market to digest the glut, says the article.
Whilst the glut remains, developers aren’t going to start new projects, not least because banks won’t finance them. That means the coastal economy will have to learn to live without a construction sector that has been one of its main pillars, along with tourism, for decades. To illustrate how important construction has been in recent years the article reveals that Spain has been building between 20 and 30 new homes per 1,000 people of population, compared to an EU average of between 8 and 10.
The article observes that in some ways, the coast is even more dismal today than it was as one big building site in the boom. It is now littered with abandoned building sites and ghost towns. That hardly makes people want to come to Spain on holiday, which may help explain why tourism numbers are down more than 10%.
In the comments section to the article published online the reaction from readers is one of near universal disgust at the way greed and corruption have destroyed the Spanish coast with mindless over-development.
You can read the original article (Spanish) here