In the boom years Spain started building an excess of 2.3 million homes that have yet to be sold, according to estimates by Ricardo Vergés, a housing market expert, in a recent article for a Spanish building sector magazine (Observatorio Inmobiliario).
Vergés, who used to advise the now defunct Ministry of Housing on housing market statistics, calculated the difference between housing starts and sales over the boom years to reach a figure for unsold new homes (including homes still under construction or paralysed).
Subtracting registered sales since Q1 2004 of 2.45 million from housing starts since Q3 2004 of 4.77m, Vergés comes up with his figure of 2.3 million housing starts that have yet to end in sales.
The graph above illustrates the point, showing the cumulative difference between the number of homes under construction (en construcción), paralysed (paralizadas), finished but not sold (terminadas sin registrar) and sold (registradas). A small number of self-builds (autopromoción) hardly change the picture.
Vergés also argues that Spain only has itself to blame for borrowing too much to build too much, creating solvency and liquidity problems for the banking sector. “The crisis has been caused by excessive supplies and prices of homes, meaning companies now can’t finish building projects, or pay back loans to banks,” he explains.
Thoughts on “Houses started during the boom: 2.3 million too many”
Those figures are quite staggering if they are accurate.
A million completed but not sold – with no doubt more in the pipeline – and half a million uncompleted.
It is going to be many years until the excess of completed properties are sold before (if) any of the uncompleted ones are tackled.
At last some figures that make sense. It’s nonsense hearing about 700,000 unsold properties in Spain. Come to the Costa del Sol and you can see most of them. Next we need to hear about 10-15 year old urbanisations that are turning into derelict ghost towns because people move into cheap new stuff rather than modernise or update perfectly nice properties.
I suppose things will go on as they did in the late 80’s with property unfinished all over the place until the government get fed up with it and have it all torn down or sold off at rates so cheap as to allow them to be finished. One thing is certain. The gross dishonesty which was the Spanish housing market really has bitten everyone seriously on the arse.