Spain’s housing stock will fall 7% in value this year, to 4.19 trillion Euros, according to a new report from the Funcas savings banks foundation. They also say there is too much rubbish property for sale, which it will take years for the market to digest.
Funcas calculate that the value of Spain’s housing stock rose by a factor of 3.6 during Spain’s decade long property boom, from 1996 to 2006, driven by “an increase of about 25% in the area of built land and a tripling in prices.”
As a result, household wealth is now double disposable income, the difference being made up by an “enormous” level of household debt that will cause problems with bad debts and defaults for a long time to come.
Too much rubbish property on the market
Interestingly, Funcas also argues there is a stock of housing and land that is “too big and of poor quality” that will take “years to digest and use properly.” This hints at separate question that I will explore in greater detail in another article. Namely, that the Spanish property market is clearly segmenting into different grades of quality, with the best starting to sell now at reasonable prices, whilst the worst may never sell at any price.
Propitious conditions say developers
Meanwhile, Spain’s G-14 developers’ association has claimed that the conditions are now right for the property market to come back to life. “Low interest rates, the correction in property prices, and the reopening of financial markets are creating the conditions for demand to start waking up,” argues the latest report from the G-14.
Getting the market going again is the key to dealing with the glut of unsold new homes, which the developers now estimate at around 732,000.
But despite the increasingly propitious conditions the developers claim to see, there will be no rebound without help from the government, they argue. So far the Spanish government has resisted the developers’ calls for a bailout.