It will take until at least 2015 for the Spanish property market to absorb the 1.5 million properties currently on the markets, according to consultants. There are around 1.5 million homes on the market, comprising of 683,000 new builds of which 473,000 are completed and 210,000 are still under construction, between 620,000 and 720,000 resales, plus another 200,000 that belong to banks, the annual Spanish Property Market Situation report by consultants RR de Acuña & Asociados shows.
This is much larger than official government estimates that currently stand at 688,000 homes on the market. But what is perhaps more worrying is the length of time it will take to clear this backlog. According to the report it will take the market until 2015 to absorb the current supply but in some of the worst hit areas it could be 2017. The estimate is based on the premise that current demand takes up between 240,000 and 280,000 properties per year.
The report also indicates that real estate prices will fall on average by another 20% over the next five years, taking them back to where they were in 2003/04. Prices will fall by 15% in cities and could decrease by up to 30% in other areas.
It also estimates that half of the stock of building land won’t be needed until after 2020 and says that Spanish property companies are saddled with almost €260 billion of debt, around 25% of Spanish GDP. There could also be around a million jobs lost in the industry with 60% of the sector disappearing.
Amid the gloomy news, the head of BNP Paribas Real Estate in Spain said that they key to the market recovering will be price re-adjustments. President Luís Martín agrees that it will take years for unsold properties to be bought. He estimated that up to a million homes on the market will have been sold by 2016.
However, Gabriel Rojas, vice president of Gaesco, is more optimistic. He says that supply and demand will become balanced sooner than expected due to a dramatic fall in housing starts. ‘Along with the fall in demand you have to add the implosion in supply, meaning the residential market will soon find its equilibrium,’ he told a conference in Madrid.