Spain housing market crash produces "Ghost Towns"

Discussion in 'Wall St. News' started by makloda, Jun 6, 2007.

  1. `Ghost Towns' Appear in Spain as Decade-Long Housing Boom Ends

    By Sharon Smyth and Ricard Alonso

    June 6 (Bloomberg) -- Javier Usua and Ruth Graneda never got out of the car when they visited Sanchinarro and Las Tablas, two of Madrid's biggest new suburban developments. The concrete-block buildings and empty streets were all they needed to see.

    ``We came to look at apartments but found ghost towns,'' said Usua, a 27-year-old taxi driver. ``You'd need to drive miles for a loaf of bread or cigarettes and my girlfriend found it creepy and unsafe so we turned around and left.''

    The abandoned developments are evidence of a housing glut that will lead to Spain's first decline in home prices since at least 1992, when the Housing Ministry started keeping records. Spanish builders constructed 750,000 houses and apartments last year, more than France and Germany combined, while annual demand runs about 60 percent of that, according to the Finance Ministry.

    ``The real killer of the housing market is the immense oversupply,'' said Gonzalo Bernardos, a professor of economics at the University of Barcelona. ``Prices are already unofficially falling.''

    New and existing house prices will drop by 20 percent from now through 2009, Bernardos estimates. The country built an average of 432,411 houses per year from 1996 to 2005, more than France and the U.K. combined.

    Spanish home prices have more than doubled since 1998, exceeding growth rates in the U.K. and Ireland, two of Europe's fastest-growing markets. The increase has been driven by a drop in interest rates to less than 3 percent from about 15 percent as Spain adopted the euro, household incomes that swelled as women joined the workforce, and a surge in vacation home purchases by Northern Europeans, mainly Germans and Britons.

    `Appraisals Are Poetry'

    As prices start to decline, Spanish homeowners may face the same challenges as buyers in the U.S., which is in the second year of a housing slump. Falling prices may spur higher delinquencies as buyers face difficulty refinancing. Spanish buyers may face an even higher risk of losing their property because housing prices are based on appraisals rather than actual sales, and appraisers often inflate values.

    ``We live in a country where everybody understands that appraisals are poetry,'' said Jesus Encinar, chief executive officer and founder of, a property Web site that tracks existing home prices in Madrid, Barcelona and Valencia. ``Bankers have said to me, `Why do you care if the appraisal is fake? It will be true in the future.'''

  2. this has been on the cards for a while out in spain.

    i think the real issue is the fact that it is so expensive to live in spain compared to 10-15 years ago.

    that was the point of relocating to spain from a country in europe.

    you could get nice weather, a nice cheap place to stay and cheap standard of living.

    you got a lot of bang for your buck.

    when i went out there last year i was paying english prices for food and beer.

    ever since the euro came in over there they jacked all their prices up.

    basically no point i would rather go somewhere else with value.

    maybe there is a cheap deal going for iran or iraq.

    two weeks, very cheap , bit of sunshine , plenty of sand for the kids etc.
  3. ROFLMAO.....So true.:D
  4. bawr


    You can start shopping for your Tehran apartment here:

    I wouldn't be surprised if it is more expensive than Madrid.
  5. One reason for the Spanish housing glut might be the policies of the Spanish Government:

    "Apart from home ownership assistance, the new National Housing Plan 2005-2008 encourages occupancy of rental properties, favouring groups with low incomes and special needs, with a particular focus on the young."

    I wonder how low income people pay rent or mortgages if they lose their job.