There are around 1.2 million homes on the market today in Spain, against a backdrop of a shrinking population, according to a recent article in the Spanish daily El Pais.
The Spanish property market maybe showing signs of recovery in some segments, but a millstone of around half a million unsold new homes continues to hang around the market’s neck.
On top of which, there are close to 700,000 resale properties on the market, according to research by the Spanish property portal Idealista.com, reported by El Pais. In which case, the combined new and resale inventory on the market today is 1.2 million homes (almost 5% of the housing stock)
As a percentage of the housing stock, the provinces with the biggest inventories are Málaga (4,5%), Almería (4,2%) and Cantabria (4,1%), the first two being popular destinations for holiday-home buyers (Andalusia’s Costa del Sol and Costa de Almeria, respectively)
3.75 YEARS OF SUPPLY
If there are 1.2 million homes on the market in Spain, how many years of supply is that? Last year, 286,400 home sales were inscribed in the Property Register, and 309,000 in the twelve months to the end of August. Assuming this year ends with around 320,000 home sales, that means 3.75 years worth of supply – the time it would take to sell all the homes on the market, at current transaction levels.
How does that compare to other countries, for example the UK? The figures may be a bit rough and ready, but Home.co.uk have identified 481,775 unique homes for sale, and there were 1,218,750 homes sold in the UK last year (source gov.uk), so the stock of homes for sale in the UK today could be in the region of 0.4 years worth of supply, compared to 3.75 years in Spain.
GLUT WON’T BUDGE
If you look just at the new home inventory, the supply ratio rises to more than six years, and new home sales are still falling – by an annualised 32% in September, according to data from the INE. The new home glut is shrinking by a paltry 5% per year, and has only declined by 19% since its peak, reveals official data. The longer a new home remains unsold, the more its value deteriorates, as houses depreciate faster when they stand empty.
Furthermore, many of the new properties on the market in Spain have no future as housing, given the lack of demand for their location and characteristics. The international ratings agency Fitch recently estimated there are around 150,000 new homes that will never find a buyer.
Many of these homes are classified as “new” because they have never been sold, but many were finished more than a year ago. Some of them might not look very new now.
Another headwind the market faces is a declining population. Another international ratings agency – Moody’s – describes Spain’s demographic decline as “unfavourable” for house prices, even if the economy improves. Moody’s expect a population decline of 1.3% by 2020, after a fall of 0.2% between 2010 and 2015, with much of the decline coming from the key 25 year to 35 year age group, normally responsible for a big share of housing demand.