Spanish Property Crash - How Bad is the Spanish Property Market?

A recently published report from a highly respected company of Madrid based Spanish property analysts has sent further shivers of fear though Spain. According to Acuna & Associates there are now (effectively) something like 1.67 million properties in Spain for sale. Evidently, this staggering figure is made up of:

- 580,000 resales

- 470,000 properties currently under construction

- 580,000 new builds 

Note that the  figure of 580,000  re-sales may be conservative given that it is impossible to be precise about how many re-sales are on the Spanish property market – given the number of uncountable private sales.  

However, what is clear is the sheer scale of the problems facing Spain – which is also facing rampant unemployment. The collapse of the construction industry has impacted disastrously upon all of its ancillary industries with the weakened state of the Spanish economy aggravated by reduced tourism from credit crunch struck Europe. Indeed, forecasts are indicating that unemployment in Spain (currently around 18%) will continue to rise with Citibank predicting 22% unemployment, Acuna & Associates 25% and respected Martin Dell of Kyero 30%.

Certainly, it is hard to find a reason to justify any recovery for the Spanish economy in in the short term. Indeed, once the money runs out for Plan E then any cap on unemployment will be removed altogether. 

So, what does this mean for the Spanish property market?

Frankly, it is hard to see any meaningful recovery for Spanish property prices for several years – not least because to clear the existing properties for sale in Spain (at current levels of demand) will take six to seven years, according to Acuna & Asociades.  

Sadly, I agree with Acuna’s assessment. The Spanish property crash is, unfortunately, on an epic scale.

Of course, until the existing housing stock is very greatly reduced Spain’s vital construction sector will be unable to regenerate. This means that one of the most important ‘pillars’ of the Spanish economy will be missing for the forseeable future with dreadful implications for the economy as a whole. Certainly, it is hard to see a viable replacement for the construction industry (let alone one that could be activated quickly) thus making the future of the Spanish economy gloomy.

Meanwhile the laws of supply and demand will mean that Spanish property values will remain low and without any significant growth for a long time. This is desperate news if you are a seller of a property in Spain – particularly if you bought at the height of the boom. Indeed, the only possible consolation for UK sellers is the strength of the Euro over Sterling thus allowing sellers of Spanish property to reduce their prices on the basis that their Euros can be beneficially converted into Sterling. 

However the strength of the Euro is a double edged sword and has meant that Britons have seen the purchasing power of their UK incomes fall dramatically – sometimes meaning that they have been forced, unwillingly, to sell their Spanish properties. They have found themselves simply unable to afford to live in Spain on their reduced incomes.

Of course, problems for some people invariably provide opportunities for others. In the case of the Spanish property crash this has led to buyers of Spanish property now being presented with almost endless buying opportunities. Virtually everything is for sale, one way or another, and a careful, well advised buyer can presently obtain very fine value for his money.

The reality, now – and for the foreseeable future – is that buying property in Spain should be far more about buying a property for ‘enjoyment’ rather than with any short term investment potential in mind. To some extent this is what a property market should be about, as opposed to a crazed and often easily out of control way to make ‘easy’ money. 

Certainly, the reasons to buy Spanish property remain sound if you wish to come to a country that has a tremendous amount to offer. The fundamentals of what Spain can provide to relocating or holidaying Europeans remain as strong as ever. The climate has not changed, the people are delightful, the infrastructure (as a whole) works, the distance from the UK remains tantalizingly close and the overall quality of life available, day to day, is superb. If you are a buyer you should therefore feel comfortable coming to Spain – so long as you do not expect any property you buy to make you quick money.

So, your emphasis now should be on buying safely – and this means buying a Spanish property that will hold its value (as a minimum) whilst having innate potential for future growth. This means knowing intimately what is on offer within the marketplace and understanding what makes one ‘bargain’ property a much better prospect than another. 

Spanish Property Crash - How Bad is the Spanish Property Market?