The Spanish housing glut should have disappear by 2017, and work on new homes will have to start by 2015 to prevent price pressures building up, argues a new report from Tinsa, an appraisal company.
Tinsa see signs of small improvements in mortgage lending that could pave the way to a recovery in demand, and a progressive reduction in the glut culminating in 2017.
Under this scenario, housing starts will have to pick up in the second half of 2015 for supply to meet demand in 2018 without price tensions building up.
Tinsa assume the excess new housing inventory stands at around 400,000, based on figures from the Housing Department, and that Spanish economy will continue to grow at its present rate, creating the jobs people need to be able to afford to buy home.
2014 will mark the bottom of the market in terms of demand, with sales of 100,000 homes, and a similar level in 2015, roughly half of them new build. That implies the market can digest 100,000 of the new homes on the market by 2016, leaving a glut of 300,000.
Small investors and the Sareb will take care of another 105,000 homes, leaving around 195,000 homes, which should be disposed of by the end of 2017.
Generalisations can be misleading, however. As Iñigo Valenzuela, head of Tinsa, points out, the market is made up of many segments, some of which have already run out of stock.
In markets like the Balearics, Canaries, consolidated areas of the coast, and city centres where demand is deep and supplies limited, sales are on the rise, whilst price declines and stocks are on the wane.
Prices declines this year
Despite some encouraging signs, Tinsa still expect prices to fall in 2014, but less than the 9pc fall in 2013. According to them, prices have fallen 39pc since the peak.
Foreign buyers will continue to be the best performing segment, as it was in 2013, with non-residents up 34pc in Q3 2013 compared to 12 months before, and resident foreign demand up 20pc.
Price pressures in future
Tinsa forecast that developer financing will return by 2015, in time to ward off price pressures in 2017.
The pipeline of new homes being started today has run dry. This could lead to an acute shortages of the type of new homes that people actually want to buy, with no demand for the rump of the glut of new homes already built in places with no demand.
Given the long lead times in the home building industry this situation is fairly likely to happen, and could spark off escalating prices off-plan, just like last time. It wouldn’t be the first time the bitter lessons learnt were quickly forgotten.