Developers in the Valencian Region have recommended demolishing homes that can never be sold to help clean up the market, reports the Spanish press.
Demolishing the housing stock with no market helped “accelerate the recovery” in Ireland after it went through a real estate crash similar to Spain, explains a recent article in El Mundo. Now it seems a similar strategy would “fit like a glove” in the Valencian Region.
“The Irish Bad Bank got rid of housing developments that were half finished when the crisis struck to unburden itself of assets considered toxic. With that they aimed to clean up the inventory and provoke a rise in prices.”
The plan worked well in Ireland, where the housing market recovered much quicker than Spain.
But let’s face it, one of the reasons why Ireland has recovered much faster than Spain is because the irish decided to grab the bull by the horns early on and write down property values and reduce the excess housing inventory.
In contrast, Spain has been more of an ostrich than a bull fighter when it came to dealing with the fallout from its property crash. Heads were placed firmly in the sand, property prices came down slowly, a bad bank was set up too late, and nothing was done about the excess inventory with no demand, prolonging the agony.
The inventory of never-sold homes on the market in the Valencian Community stands around 99,000 according to a recent study by Servihabitat, most of it in the hands of banks.
The Valencian region has the biggest glut in all of Spain, with one in every five of the 367,500 homes never sold in Spain located in the region. Servihabitat forecasts that the stock will decline 16% this year in the region compared to 25% for the country as a whole.
The problem is mainly in the interior of Valencia, not on the coast, explains the article. There is a market for homes in places like Javea, Torrevieja, and Benidorm, largely due to foreign demand.
SPANISH BAD BANK RULES OUT DEMOLITIONS
The Valencian developers might be calling for demolitions, Jaime Echegoyen, President of Spain’s ‘Bad Bank’ (Sareb) has ruled it out for the inventory his organisation controls, even though it was part of the original business plan. Homes with no market will end up offered as social housing, he recently said.