The G-14 group of Spain’s biggest developers has warned that the glut of newly built properties languishing on the market is set to continue growing, heading for 800,000 properties by year end. Facing an increasingly bleak situation, the G-14 have called on the government to stimulate the housing market. And not for the first time.
This massive over-supply of new housing, the equivalent of 3 or more year of sales, compared to just 9 months stock of new homes in the US, could keep some segments of the market depressed for years to come. The rational response from the industry would be to stop building until the market has digested the glut.
Fortunately, that is what appears to be happening. The glut “is causing a severe contraction in housing starts,” the G-14 informs us in its latest report on the sector.
But with housing starts plummeting, developers may soon find themselves with nothing to do, once they finish off projects started in happier times. Which is why the G-14 continues to call on the government to help to stimulate the housing market. It should be noted that all previous attempts have fallen on deaf ears.
As before, the developers are waving the unemployment stick at the government. “In the absence of compensatory measures, the additional fall in the number of homes under construction will continue damaging the labour market in the coming months,” say the G-14, who call for “measures aimed towards changing the tendency in sales and housing starts en the residential sector, whose contribution to the recovery of the Spanish economy will be critical .”
But whatever the G-14 says, the brutal reality is that Spain has too many newly built homes on the market at unrealistic prices. There’s not much the government can do about that.