Glut of new homes shrinks in 2016 but still a problem in some areas

Tinsa estimate of Spanish new homes inventory and glut ratio end 2016

Tinsa estimate of new homes inventory and glut ratio end 2016.

The new home glut ratio fell by around 15% in 2016, according to research by the appraisal company Tinsa.

The glut of never-sold new-homes has been a millstone hanging around the housing market’s neck for the best part of a decade. The glut – largely owned by the banks – holds back new development and depresses prices at the bottom end of the market, which influences price expectations up the ladder. Many new homes were built on the coast during the boom years, so the glut is relevant to foreign buyers and vendors, who tend to focus on the coast. Quantifying the glut and measuring its change helps understand the market.

Tina approach the question of how to quantify the glut by dividing the current stock of empty new homes by the total number built since 2008. They estimate that 1.6 million new homes have been built since 2008, and there are currently 340,000 for sale. By this measure the glut ratio stood at 21% at the end of 2016, down from 25% at the end of 2015, a decline of 16%.

The smaller the glut ratio gets, the quicker the excess housing inventory will be absorbed, freeing up capital and demand for new development.

The map above shows where inventories are concentrated – the bigger the circle, the bigger the stock of new homes. However, the important figure is the glut ratio, which implies how quickly the stock will be absorbed. So although the biggest inventory is located in Madrid, the glut ratio in the city is below 15%, so stocks will disappear relatively fast unless more new homes are built.

New home inventories fell the most last year in Bilbao (Basque Country), and the Costa Tropical, in Andalusia’s Granada province, where the glut ratio has fallen to less than 10%.

The situation is more serious in the Valencian Region’s Castellón province, home to the Costa del Azahar, where although inventories are much smaller than Madrid, the glut ratio is above 30%, implying it will take much longer to sell. There is also a problem in Catalonia’s Tarragona province, home to the Costa Dorada, where the glut ratio is 30%.

Unfortunately, many homes were built during the boom years in places of little or no demand, especially in the interior of the country. There is a stock of homes in some areas that will never sell, and one day will have to be torn down.

Tinsa also report that new development is picking up, with 63,100 under construction at the end of 2016. Most new homes are being built in the Madrid region (15,900), followed by Alicante (5,500), and Barcelona (4,500).

About Mark Stücklin

Mark Stücklin is a Barcelona-based Spanish property market analyst, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008). He can be reached by email on ms@spanishpropertyinsight.com. All articles published in good faith as a general guide but no substitute for professional advice. Please read the SPI disclaimer

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