No end in sight to Spanish real estate glut

Just when you thought the Spanish residential over-supply could not get any worse, something proves you wrong. A report from the Spanish housing ministry shows that the over-supply of homes on sale without buyers rose by 12 per cent to 688,044 in 2009, adding to a previous 'reservoir' of some 300,000 unsold homes, bringing the total to almost exactly one million. The report rather optimistically says the 12 per cent rise in 2009 was "the lowest level in recent years, in which increase were always above 40 per cent" and then admits that a further 529,000 new homes were under construction at the end of last year.

This may be 100,000 fewer than under construction in late 2008 but still represents a massive problem in a market flooded with homes on sale. For many, the Spanish problem is at its most acute in holiday home areas on the coasts. The 17 coastal provinces of the country possess 61 per cent of the unsold properties – a vast imbalance when you consider the enormity of Spain's interior.

This huge coastal glut is in addition to the thousands of existing homes in those same locations now on sale by owners. Some owners simply want to get rid of a bricks-and-mortar albatross, others are in desperate need of selling a home they can no longer afford while of course there are bank-owned repossessions being sold at extremely low cost, making existing and new-build homes appear very unattractive in terms of price. The pain in Spain continues apace. No end is in sight – and this may last many years.

- Graham Norwood is property correspondent of The Observer. The views expressed are his own

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