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.