The slow progress on digesting Spain’s housing glut is bad news for a Spanish economy that has always relied on construction for growth and jobs.
Housing starts have fallen off a cliff but the rate at which Spain’s excess housing inventory is being digested is all too slow, according to the latest report on the Spanish economy by BBVA, one of Spain’s top-2 banks.
The housing inventory on the market at the end of 2011 was 4% of the total housing stock say BBVA, compared to 4.1% a year ago, so basically no change in a year when Spain should have been flogging off homes as if the economy depended on it, which it did.
Compared the 4pc inventory figure from BBVA with the 7.5pc figure I arrived it in my back-of-the-envelope calculations a few weeks ago (2 million Spanish homes on the market that will take 10 years to sell). If my figures are closer to the truth then iit will take twice as long to sell all those homes (some of which can’t be sold at any price).
Why is the housing glut shrinking so slowly? Because banks like BBVA, who now have a lot of properties for sale, haven’t dropped their asking prices enough and aren’t lending mortgages whilst unemployment has shot up to close to 25pc. Spaniards may want to buy homes but they can’t afford to.
BBVA forecast that residential real estate investment will fall another 6.6pc this year before beginning a weak recovery in late 2013.
BBVA also point out that there will be big variations in local housing markets, with some areas doing much better than others.