The glut of new homes is still one of Spain’s biggest problems, and the longer it last, the harder it will be to solve.
There were 676,038 newly built homes languishing on the market in search of a buyer at the end of 2011, according to the latest figures from the Government (Fomento – see chart above).
The excess new housing inventory declined by just 1.7pc in 2011 compared to the year before, as illustrated by the next chart. On the other hand, it increased by an astonishing 90pc in 2005, which should have set the alarm bells ringing in the building industry. Compared to the increases in the boom, the declines in the last cople of years have been insignificant.
The lack of progress in dealing with the glut is a result of weak demand (unemployment, credit crunch), and more new homes coming onto the market, as developments started at the tail end of the boom are finished.
Now that housing starts have collapsed to almost nothing, meaning the pipeline will soon be dry, I think next year we will finaly see more progress being made in mopping up the glut.
But with demand as weak as it is it could take between five and ten years to deal with glut, unless the Spanish economy surprises everyone and roars back to life in the next couple of years (don’t hold your breath).
Which introduces a complication: The longer a new home goes unsold, the harder it is to sell (and the more it costs to maintain in a saleable condition). All those unsold new homes on the Spanish coast are quietly depreciating and will soon start to look decidedly shabby, and shabby doesn’t sell well. The surrounding areas start to suffer, and then it’s downhill from there.
Where are the biggest problems? This map shows where the biggest concentrations of new homes for sale are to be found, as a percentage of the overall housing stock. The darker the green, the bigger the glut. The regions with the biggest gluts are Andalucia, Valencia, and Catalonia – all areas along the Mediterranean coast where too many holiday-homes were built.