Big discounts, and a total collapse in new building activity are taking their toll on Spain’s excess new housing inventory, which is starting to shrink.
Everyone knows that Spain built too many homes during its decade long real estate boom, leading to monumental glut of new homes languishing on the market when boom turned to bust. The overbuild was encouraged by cheap credit, deluded forecasts, and a good dose of corruption at almost every level of Government.
Now, 6 years after bubble burst, the Spanish new homes glut is showing signs of decline, partly because lower prices are stimulating demand for new homes, and partly because housing starts have collapsed. The pipeline of new homes being built is now completely dry.
León leads the way
The Northern Spanish city of León provides an example of how the glut of new homes is being digested. According to press reports, the new homes inventory in León has declined by 40pc in the last 2 years, from 10,000 to 6,000 units today. Price falls of 50pc, and a complete lack of new developments in the last few years are doing the trick.
Residential planning approvals in León have fallen 97pc in the last 6 years, from 10,824 in 2006 to just 333 last year, according to Ministry of Public Works (Fomento). In a couple of years there will be an acute shortage of new homes in León.
The same is happening to greater or lesser extents across Spain. According to Cepco (Spanish Confederation of Associations of Construction Product Manufacturers) the country’s new housing stock fell by 50,000 units last year, and this year is predicted to drop by another 75,000: a 20.7% decrease over the 2 years.