A new study by consultants Acuña & Asociados estimates there are almost two million homes for sale in Spain, which will take 10 years to sell.
The 2 million figure is comprised of newly built homes and resale properties, which means the total housing inventory on the market.
That sounds like a lot, but is it? It depends how it compares to the overall housing stock, and how that compares to other countries. It also depends upon the turnover rate – i.e. how quickly homes sell in Spain.
Assuming there are 26.5 million residential properties in Spain (there were 25.8 at the end of 2010, according to Government/Fomento figures), that means that roughly 7.5pc of the housing stock is on the market.
I don’t have figures from other countries to compare to (after a fruitless search), but I wouldn’t be surprised if it is a lot higher the EU average. All of which would suggest that Spain has a big oversupply of property for sale, compared to other counties. I’m sure many readers will be thinking “tell me something I didn’t know.”
Another way to judge the oversupply is to estimate how long the inventory might take to sell, using the current sales rate and estimates of future demand (household formation). Acuña & Asociados calculate it will take 10 years for the inventory to sell, assuming household formation of 200,000 a year between now and 2020.
10 years to turnover the current housing inventory (for sale) is a big problem that will be with us for years to come. All of which suggest that downward pressure on prices won’t go away anytime soon. Good news for (cash) buyers, but bad news for builders and vendors.
Acuña & Asociados also estimate there is a land-bank to build another 4 million homes, which won’t be needed for years. Guess who owns the land? Basically, the banks, either directly or indirectly.
If these figures are correct, how much do you think that land is worth? You don’t need an economics degree to work it out, and what it means for the balance sheet of the Spanish banking system.
The only way Spain is going to get out of this hole is a combination of 1) economic growth creating jobs and demand for homes, 2) selling lots more properties to foreign buyers, and 3) high inflation reducing the real value of debts and making property an attractive investment. I’m expecting the inflation, but I’m not so sure about the other two.
Thoughts on “2 million homes on the market that will take 10 years to sell”
Good report, but I dont think it is as simple as that. Selling a lot of property is possibly the key not only to the housing market but also to “Spain PLC” as well. My view has for a long time remained the same. Come out of the Euro, after some deal is done on debt denominated in euros. Germany of course doesnt want this as it disrupts the level playing field for their exporters but going back to the Peseta would allow timely devaluation, a way in which these Med economies dealt with inflation and rising debt in the past. This would also revalue the housing market , probably by a real term 30-50%r reduction and make Spain cheap again to holiday and purchase property, resulting in an influx of buyers currently scared that the market will collapse further. This in turn brings more taxes on closing costs for the government and tourism brings in much needed capital to an economy reliant to a degree on this industry
Good report, but I dont think it is as simple as that. Selling a lot of property is possibly the key not only to the housing market but also to “Spain PLC” as well. My view has for a long time remained the same. Come out of the Euro, after some deal is done on debt denominated in euros. Germany of course doesnt want this as it disrupts the level playing field for their exporters but going back to the Peseta would allow timely devaluation, a way in which these Med economies dealt with inflation and rising debt in the past. This would also revalue the housing market , probably by a real term 30-50%r reduction and make Spain cheap again to holiday and purchase property, resulting in an influx of buyers currently scared that the market will collapse further. This in turn brings more taxes on closing costs for the government and tourism brings in much needed capital to an economy reliant to a degree on this industry.
I would also add that having dealt with Spanish banks and repossessions, There is a large percentage of their stock that will never sell as it is just bad property
Mrs Angela Chippington says:
Could you pease send me details of bungalows or houses that are for sale in Spain or Tenerife. The price bracket I would be looking at is between 60,000 euros to 80,000 euros. Many thanks.
Richard B says:
I think the only way out in my view is for the prices of the properties to reduce significantly, then level out and start increasing, so they become affordable for local buyers and more attractive to foreign buyers. There should be a ban on new housing development until the present stock is significantly reduced. The banks hold much of the property at excessively high prices as they are overdeclaring the values. The sooner they declare fair value and sell the properties at lower prices the better. In addition the Spanish Government should make it more attractive for foreign buyers, by reducing VAT and property transfer taxes, and changing their inheritance tax rules. Leaving the Euro would also be a good thing for the Spanish economy in my view, as it would reduce prices for foreign buyers, attract more retirees from Northern Europe and the UK, increase tourism revenues and make Spain more competitive in their exports.
Richard B says:
Further to my previous post, regarding a ban on new developments, banks should have to release their unsold housing stock of uncompleted and unsold developments to developers at attractive fair market prices, so the developers can restore the developments to a good saleable condition, otherwise we are going to end up in even more of a mess. Perhaps an auction system could be set up whereby banks have to sell a certain percentage of their stock every year. If they started selling off their most attractive properties first, then buyers would be motivated to get in earlier.
Lookin very good very good indeed!!
Juan Miguel says:
Mark thank you for your item. 2,000,000 was what anyone without wishful thinking thought right from the start of the crisis.
I cannot see how you can feel that there could be a period of high inflation with Spain’s economical situation. Reasons are the limitations the EU will impose and with soon 25% unemployment a shrinking domestic demand. I believe it will be deflation. After all that is what the EU expects from Spain.
The banks already have auctions, but their websites are generally in Spanish and so not picked up by no spanish speakers. It is easy to say let the banks flood the market with cheap property, but that does crystallize a loss for them, harming balance sheets and will decimate the market, making it even more unstable. The banks are receptive to bids for properties as it is, just have to know who to talk to! If the 2m figure is correct, I would estimate half of this is absolute rubbish that will never be sold at prices anywhere near their published prices, if at all. This should be taken out of the equation, as it will not act as an overhang in the market. I liken it to the price of oranges and perished oranges having no drag on the supply/demand pressure on prices
prakash s. rangani says:
i,m looking for an apartment with 3 rooms two toilets garage elevator natural views and close to the centre of town . torremolinos is the place i would consider. my budget being 50000 euros to
60000 euros. many thanks.
Paal A. Nordhagen says:
do you have some web-adresses on spanish banks that have such auctions?
paul@Polaris World says:
I think the situation on prices is far more complex than simply the level of outstanding stock in total. Our business is the largest international seller for CAM bank. CAM bank are up there as one of the biggest real estate owners in Spain. What we have seen in the lat two years is increasing demand for the quality locations, while the rest are left behind. Hence on some of the resorts in Murcia, we have sold well over half the stock for CAM already – maybe another 6-12 months left. What this means I think for Spain is that the next few years will be buoyant for sales in the quality locations while the debris is left to sit. As the economy picks up in a few years the less desirable properties will be mopped up quickly as the economy accelerates.
David Lyth says:
Interested to know where the quality locations are.
Does a map for these exist?
We have an apartamente in C.Brava 40Km from French border. I would have thought it a quality location yet Mark’s map showing houseprice falls shows it as having lost quite a lot of value.