Oversupply of new Spanish property will take two years to digest

With approximately one million new homes on the market any property completed by developers in the next two and a half years will join Spain’s growing inventory of new homes.

The oversupply of new build Spanish property is not uniformly spread around the country, however, according to Itec the main problem is on the Spanish Costa’s, where properties were built primarily for foreign buyers, predominantly the British, who have now virtually disappeared from the market.

Due to long lead times and inertia in the construction business, there will be more than 600,000 property completions in 2008, despite a severe drop in demand, which helps to explain why Spain’s new housing stock is growing so fast. “In 2008 there has been a lot of work, almost as much as in the best years of the boom,“ says Josep Fontana of Itec, quoted in Spanish daily newspaper La Vanguardia.

Itec forecast that in a report carried out for Euroconstruct, the number of completed properties will fall to 300,000 in 2009, a 50% fall in output compared with 2008, before stabilising with a 2% fall in 2010. That would transport residential property construction numbers back to where they were in the mid nineties, before Spain’s real estate boom started.