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RR de Acuña: Spain Still Has 1.6M Unsold Homes

19 October 2015 – ABC

A common remark between experts in the real estate sector is that the market will not fully recover until the residue of unsold homes originated during the boom years has been fully absorbed. The actual number we are talking about is difficult to quantify. In July, the Ministry of Development said that the number of unsold new homes decreased last year to 535,734 properties, 5% fewer than during 2013.

In the context of a strong slow down in the sale of new homes (down by -36.6% until July), the number of unsold second-hand homes becomes particularly important when we want to determine how long it will take the sector to absorb the legacy left over from the real estate bubble.

A few weeks ago, the real estate consultancy RR de Acuña y Asociados published this year’s version of its annual statistics on the Spanish real estate market, in which it indicated that this excess amounts to 1.6 million homes. Specifically, the consultancy firm estimates that the balance of unsold new homes amounts to 502,000 (261,000 fewer than in 2011) and the balance of unsold second hand homes amounts to 1.15 million, 189,000 units more than four years ago. Of all of those homes, 688,000 are located in metropolitan areas, 331,000 in coastal regions and 657,000 in other regions, where there is “no demand whatsoever”, a cutting finding from the study.

Two-speed market

On the basis of these figures, taking into account the stock of homes and the current demand volumes, the report estimates that it will take an average of six years to absorb this stock. However, the variation by geographical region is significant: in the areas along the east coast, especially in Valencia, Castellón, Murcia and Almeria, the estimated time for the absorption of the real estate stock ranges between 6.5 and 10 years. Whereas, in Madrid, the País Vasco (Vizcaya and Vitoria) and certain parts of Cataluña, such as Barcelona and Gerona, the time is notably less, ranging between 1.5 and 3.5 years.

“Spain continues to be a two-speed market….” Says Fernando Rodríguez de Acuña, Project Director at RR de Acuña y Asociados. Madrid, Barcelona, Málaga and Alicante account for most operations: together they accounted for 39.4% of all activity during the second quarter of the year. The capital (Madrid) is particularly significant, as it accounted for 14% of all transactions. (…).

What needs to happen to completely drain off this stock of homes? The report forecasts that this excess will decrease by 120,000 homes over the next two years, albeit at a slow pace. Growth in potential demand depends on the financial institutions completely eliminating “the credit restrictions”, as well as the ability of “solvent” potential buyers to take on debt. The study points out that “half of the jobs created in 2014 were temporary, part time and poorly paid”. Rodríguez de Acuña says that “salaries need to be doubled to achieve the right balance” and he cites a study performed recently by his firm, which concludes that almost 60% of people cannot currently afford to buy an average home.

Original story: ABC (by L. M. Ontoso)

Translation: Carmel Drake