A new study reveals the Spanish property glut has shrunk by more than a third in the last five years, mainly in regions with the best economic growth, according to a recent article in the Spanish financial daily Cinco Días.
The Spanish Confederation of Manufacturers of Construction Materials Associations (CEPTO in Spanish) estimates that there are now 439,617 empty “new” builds in Spain, down by 36 per cent over the last five years.
“New” in the Spanish context means “never previously sold”, as many of these homes might have been completed years ago.
Just as has happened with house prices, the decline in the glut of new homes has varied enormously by region, with an obvious correlation to regional rates of economic growth: excess inventories have declined the most in regions with the strongest economies, not the lowest house prices.
The five Spanish regions where the glut of new homes has fallen the most between 2009 and Q3 2014 (the latest official statistics) are Navarre, Cantabria, Extremadura, the Canaries and Madrid. In the case of the capital, the stock pile has decreased by 45 per cent, while in Navarre, the drop has already reached 93 per cent, meaning there is no longer any inventory of new homes in the Navarre region.
The regions with the strongest economies over the same period were the Canaries, Madrid, and Navarre, suggesting a correlation between economic growth and the decline in new housing inventories, say Cinco Días. Catalonia and the Valencian Community also achieved noteworthy increases in GDP.
How have prices for new-build property changed in the same period? According to figures from the Spanish Ministry of Development, the regions that have registered the biggest price drops are Murcia, Aragon, the Valencian Community, Castilla-La Mancha, and Andalusia. In all of them, house prices have declines by between 33 and 44.5 per cent. This suggests that economic growth is more important to demand than lower prices, as stocks have dwindled the most in areas with higher economic growth rather than the biggest price declines.
Cinco Días also point out that inventories of new housing are lowest in areas where the incipient economic recovery got going first, in particular the Balearics, Navarre, the Canaries, the Basque Country, Madrid, Catalonia and the Valencian Community.
What’s happened is that the new housing inventory has been diggested in areas with the best economic prospects where people want to live, and left to rot in areas where it should never have been built in the first place. The Spanish housing glut is now largely concentrated in areas with no demand, whilst shortages are emerging in places where people want to buy.
Job creation, mortgage lending, and economic growth will determine housing stock levels in future, Cinco Días reminds its readers.