For the first time in Spain, property developers have recognized in public that it could be better to demolish developments that were built up in the Spanish property boom and will never be sold. It was a public statement announced last week in Valencia during a seminar run by the Asociación para el Progreso y la Dirección (APD). The idea to demolish non-marketable developments is not new – in Ireland and Germany it was being debated months ago. Francisco Carbonell, Managing Director of the firm Onofre Miguel, and Consuelo Sempere, Delegate of Levante Tasaciones Inmobiliarias, are some of the professionals who spoke out about this point, according to the local newspaper Las Provincias.
It confirms what we said in The Spanish Brick: there are developments that will never be sold since they are extremely bad located and lack minimum utility services such as water or electricity. The most difficult task will be to find out how many ˝junk properties˝ there are in Spain. Certainly the number could be tens of thousands of units.
The statement from developers in Valencia, which is one of the areas most affected by the property boom and its aftermath, must be contextualized within the current re-adjusting process of the market. Whereas these ″toxic assets″ should not be considered part of the property stock, recent statistics point out there is a significant reduction in new house building in 2010. Overall, new built homes from January to July 2010 have dropped by 169.953 (35%) compared with the same period in 2009. It is a remarkable slowdown.
The Spanish Brick view
From our point of view, the ˝junk stock˝ should be excluded from the market since they are a aggravating factor for the normal recovery of the market, rather than demolished. ″Junk properties″ that were built up by speculators in the peak of the boom are now a burden (toxic assets) for the real surplus of property that potentially can be sold in a reasonable period of time according to the reality of the market.
Why not to demolish them? This is because demolition will increase the economic cost of the development, and also generate an environment cost and a moral cost that Spain can not now afford.
It is a complex situation. Therefore, the measure would involve developers and administrations in order to find an alternative social use for the maximum number of these developments.
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