Spanish Property Developers Expect the Stock of Newly-Built Homes to Disappear Wwithin the Next Two Or Three Years

22 June 2010

Source of information: El País, Friday the 21 of May 2010

According to José Manuel Galindo, president of the Association of Developers and Constructors of Spain (APCE), the high amount of newly-built and unsold houses will decrease this year. Thus, the market will take between two or three years to digest the current enormous property stock.

However, the major over-supply which exists in some areas, like in the Mediterranean coast, will not disappear until four or five years from now.

For example, in the autonomous region of Madrid, the excess inventory of new homes will be gone in less than two years, while the same process will need another 4 to 6 years in Catalonia, the Balearic Islands, Almeria or Tenerife.

Spanish property developers are confident that sales will continue growing to a total of around 300,000 units this year, which would be 80.000 more than the last year. However, they acknowledge also that the increase of sales results mainly from the cutback of tax allowance in 2011, which were granted to purchasers of main residences.

According to Yolanda Fernández Pereira, Real Estate Market Analysis Director at Asprima, one has to distinguish to which point such increase of sales is growing demand and not just “performance in full discharge of an obligation” to the Spanish banks and savings bank. Furthermore, due to the new factors such as the value-added tax increase, the sales of 2009 and 2010 cannot be extrapolated.

The chief economist of the BBVA Group, José Luis Escrivá, pointed out that the dependence between promoters and financial institutions must come to an end and initiated new projects with a higher percentage of equity capital. The sector constitutes 50% of all Spanish company debts, though its market share is only 15%.

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