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The current state of Spain’s housing stock summarised

The surplus of unsold new properties in Spain reached 389,000 units, according to a report from Tinsa ( property evaluation company ) , a figure that will require two and a half years for the stock to be absorbed. This means that the date of reference is the first half of 2008 and that the demand will be for around 150,000 new houses a year.

Their statistics indicate that the current stock of housing corresponds to approximately 25 per cent of all flats that have been constructed since the boom, meaning that one out of every four homes is for sale.

Tinsa’s report, “In-depth Analysis of the 2015 Stock of Housing,” highlights that despite the crisis, 1.56 million homes have been built since 2008 in Spain, a figure that is equivalent to 6.4 per cent of the existing real estate market.

 

Where is there the greatest number of vacant homes?

Currently, there are 389,000 new vacant homes, with the provinces of Madrid, Valencia, Murcia, Barcelona and Alicante amassing the highest number.

 

The most problematic regions

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Nevertheless, if we put aside the total number of unoccupied homes and look at how much they represent in terms of the total volume of finished houses, we discover that Almeria (38.9 per cent), Cuenca (37.1 per cent), Castellón (36.1 per cent), Toledo (34.7 per cent) and Murcia (32.7 per cent) have the highest rates of vacant homes. Thus, according to Tinsa, the main problem consists of how much that stock means within the rate of homes constructed in each area.

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Tinsa’s report reminds us that the paralysis of trade during the crisis has brought a great number of developers, incapable of facing the loan obligations they took on, to bankruptcy. In this scenario, financial entities have made their appearance as new property owners and, as a second derivative, SAREB (Company for the Management of Assets Proceeding from the Restructuration of the Banking System) and bank mortgage services have arisen as the new actors in the sector. In fact, they control 86.1 per cent of the total market.

 

Tinsa claims “there is a correlation between the use of this formula and the proportion of stock. It is in those locations where there is a high percentage of new, overbuilt vacant housing, that rentals are put on the market at a much higher rate. In those areas where the vacancy rate of new homes is higher than 50 per cent, the average rate of renting reached 12 per cent. And, conversely, in locations where the stock [of vacant homes] is less than 10 per cent of the housing constructed, the rate of renting does not even reach 6 per cent.”

 

Other revealing data shows that part of the stock is out of the market: it is neither for sale nor for rent. Tinsa puts that residential stock at around 3.9 per cent. As Tinsa explains, “Not all the stock waiting to be sold has a ‘for sale’ sign. It’s difficult to estimate which part of this stock of new vacant residences is not being marketed, but it represents a relatively low percentage of the total amount. As in the present situation in the Spanish municipalities with the biggest market of new construction for sale or for rent, about 4 per cent of the stocks is found outside of the market.”

The appraisal firm claims that there are multiple factors that explain why there are still almost 400,000 empty homes on the market. Among them are bankruptcy, poor building location, high prices and a lack of strengthening in the current environment.

 

Prices will remain stable in 2016

The appraisal firm claims that the widespread feeling is that prices are in a stable place. This is a theory shared by the consensus of experts.

Indeed, this belief is so widely shared that the expectation for next year is that prices will be stable for more than half the stock. Specifically, Tinsa believes that the price of 41.3 per cent of surplus homes will stay stable, while another 22.5 per cent could experience a slight rise of in between 0 and 3 per cent. However, about 19 per cent could drop by as much as around 3 per cent.

What is clear from the report is that there will not be big decreases or increases: hardly even 1.8 per cent of the stock stands to drop more than 6 per cent and another 2.3 per cent could rally above said level.

 

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