Spain Real Time Data Charts

Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Spain related comment. He also maintains a collection of constantly updated Spain charts with short updates on a Storify dedicated page Spain's Economic Recovery - Glass Half Full or Glass Half Empty?

Saturday, September 26, 2009

Three Million Unsold Properties In Spain - Update

In my last post on this topic, I said the following:

My second observation is merely anecdotal, but the Acuña & Asociados report places a lot of emphasis on the coastal situation, which has, to some extent, already been “factored in” by most participants, however quite by chance I have talked with a number of people in recent days who have stressed with me just how serious the situation is in the satellite towns around Madrid, built as they have been for Ecuadorians who never arrived, or Romanians who have already left. I think this element is yet awaiting a proper accounting, and the cost is unlikely to be small.

Well, "Lo & Behold", Spanish property portal have done a bit of digging, and here is what they found. Going through the official Ministery of Housing data they were able to locate 22 "black spots" (towns or cities with over 25,000 inhabitants) where the price of housing has already reputedly fallen by more than 30% from the December 2007 peak. This compares with the official average price fall of only 8% for the whole of Spain. And incredibly (see the chart below) no less than nine of these "black spots" are in the Autonomous Community of Madrid - that's roughly 40% of the most severely affected areas nationally are in only one community.

The areas affected are Alcalá de Henares (-37%), Alcobendes (- 47.6%), Alcorcón (-34%), Aranjuez (-35%), Colmenar Viejo (-33%), Leganés (-33%), Móstoles (-33%), Pinto (-37%) and Rozas de Madrid (-35.1%). By way of comparison, in Catalonia there are only two such areas, Castelldefels (-33%) and Sant Cugat del Vallés (-32%). Many of the worst affected areas in the Mardid area are in centres of high inward migration, but there are also some quite surprising names, like Alcobendas, one of the richest towns in the whole area, and home the famous neighourhood La Moraleja where so many of Spain's publicity seeking but camera shy elite seem to find shelter.

Of course, it isn't clear what level of reliability is to be placed on official government statistics, but on the other hand this data does put some flesh on the otherwise anecdotal evidence I have been hearing, or on those reports of trains which stop at stations where no one seems to get either on or off. We are talking about new building with large infrastructural projects to support it here, and of course, as I keep saying, if the immigrants simply walk, who is ever going to live in some of these places?


Anonymous said...

Isn't Castelldefels also a "better" area?

Edward Hugh said...


"Isn't Castelldefels also a "better" area?"

Not really, nearby Sitges is much more up market. But Sant Cigat definitely is, and they have big problems there, since a lot of young people moved there out of Barcelona, following the craze. Now prices are falling sharply, energy costs are tending up, and they are stuck. But fortunately Sant Cugat seems an exception in Catalonia, although I'm sure there is plenty of smaller scale mess here.

Anonymous said...

Dear Edward,

that you are running a great blog you know already, so i'm not gonna repeat it. But today I have to ask something:

On closer look, the data don't seem to make much sense:

Alcobenads -47.6%
San Sebastian de los Reyes -1.5%
(Edward, your table cuts out San Sebastion de los Reyes, it appears just below San Fernando in the original one)

How can this be? San Sebastian de los Reyes and Alcobendas are one urban area, but in all the Madrid area prices have fallen most in Alcobendas whereas the have been the most stable ones in SanSe ?

Are the data simply flawed or is there an explanation for that?

Edward Hugh said...

Hello there,

"How can this be? San Sebastian de los Reyes and Alcobendas are one urban area, but in all the Madrid area prices have fallen most in Alcobendas whereas the have been the most stable ones in SanSe ? "

Really the answer is I haven't a clue. But a guess would run something like this. Maybe half of the new property built in the last year has been bought by the banks (such good customers). But most of these acquisitions are "dacion por pago", that is they are only sold to cancel the debt. So these are not real street prices, but they are prices registered as transactions.

This is why, for example, if you look at the post on idealista, many in the comments say they can't find these reductions on the street. Of course they can't, they aren't banks (or their employees).

So the biggest *registered* declines would be in the areas with the highest concentrations of "dacion por pago" - or new, unsellable building. Which is why this data is so interesting, and fleshes out a lot of the runours.

On this hypothesis, San Sebastian de los Reyes should have a lot less "junkbuilding" than Alcobendas. I'm not in Madrid so I have no idea, perhaps you can clarify. But certainly, here in Catalonia Sant Cugat and Castelldefels fit this picture like a glove.

Anyone else out there have any ideas.

Incidentally, I didn't cut San Sebastian de los Reyes intentionally, it just fell out the bottom of my copy edit. I was too focused on the red letter towns.

James Baker said...

In August I wrote an article about the outlook for Spanish property prices (shameless plug below) which was pretty gloomy and doomladen. It refers to 900.000 unsold properties. I've no idea where this 3 million figure comes from but I do agree with the generally negative sentiment of the blogposts. The Economist is now talking about Spain tipping into depression just as other countries in Europe seem to be improving.

The article's called:

Anonymous said...

Hi Edward,

Thanks for the attempt to explain that SanSe-anomaly. Very interesting!

I do live in the region and from what I can see (caution, this is an impression gained from driving by on the highway, but anyway), so what I see is indeed some large very new "urbanizaciones" in Alcobendas.

A pity the idealista folks don't show data on Tres Cantos. A small town in between Alcobendas and Colmenar where I happen to live. Now, there has been no construction activity over the last years in Tres Cantos (I mean compared to the the usual crazyness). So according to your explanation, prices should have stayed flat here as well.

Anonymous said...

Hi Edward,

The Gobierno presented already "los Presupuestos Generales del Estado" (Spains's Budged) for 2010. It tries to compensate the fall in revenue through increase in taxes as you probably know. It cuts costs in some areas in order to allocate more resources for unemployment, for instance

Nevetherless, we keep spending more than we have at disposal, which will send us to bankrupcy at some stage if nothing is done.

What do you think about this budget? And what do you think the Spanish budget should look like at this stage? Should they go straight to cut aggressively for example 20% costs overall to improve competitiveness and the private sector to follow? what kind of measures do we need at the moment before we melt? Trichet said yesterday that the measures the ECB is taking to support liquidity can not be maintained indefinitelly. It sounded as a message for countries like Spain


Edward Hugh said...

Hello Jaime,

Look, I think the problem is not the budget, since this is a secondary issue, and is only arising in this way since the primary issue has not been addressed. The problem is that having left the situation gradually go to hell for more than two years now, there are no short term solutions that won't make things seem worse, that is to say that won't send unemployment shooting up quite dramatically.

Hence I don't see any politician now really getting hold of this, and what we can expect is a further steady and continuing deterioration till Brussles directs us to Washington to be put in the straught jacket by the IMF.

Let's look at the sort of thing we need.

1) A NAMA type bad bank, to buy up around €500 billion toxic and near toxic assets (developer loans, houses, land etc. - this will need to be paid for by issuing bonds - 50% or so of GDP, which will have to be bought by the ECB (like the NAMA bonds) - that is to say the first move is to reach agreement with the ECB. The €9 billion that is currently in the FROB is frankly pathetic.

2) An internal devaluation process to bring the price and wage level down around 20% - not all at once, but say over 2 years. Since Spain is a market economy there are only 2 things which can achieve this as far as I can see

a) strong flexibility facilitating change in the employment law, and a short term surge in unemployment to force down wages.

b) Cuts in all salaries and payments to those receiving money from the public sector, possibly starting as in Hungary and elsewhere with an 8% cut, and then two further smaller cuts. This is to get wages down, not simply to reduce spending. This will have to include pensions.

c) Reduction in the public sector workforce by an indeterminate percentage. Accompanied by all manner of document simplification to encourage activity in the private sector.Inevitably however, since this is a revenue saving measure this will hit schools and hospitals, as we have seen in Latvia and Hungary.

3) A change in the persoanl bankruptcy law to offer help to all those people who will end up with ridiculously high loan to value ratios on their homes onece the new price level settles in, and properties touch the bottom of their own particular "correction"

Well, this is all very draconian, but what do you want me to say. This is where we have reached, after two years of doing nothing to seriously address the underlying problems, which were, if I may say so, absolutely obvious from the outset.

So if you don't like the sound of the above, and I wouldn't blame you if you didn't, please don't vent your anger on me (don't shoot the messenger) but rather go and speak to those who have lead Spain to this lamentable situation.

Equally, you can cross your fingers, hope I am wrong, and come back this time next year to see what my list might look like by that point.

All the best,


Anonymous said...

Hi Edward,

there are still some out there who don't shoot the messenger if the messenger might sound right.
Then, this saying applies well to Spanish situation:
Most do what they have to do. Those who success do what is needed to be done. I hope we end up being in the second pocket


Anonymous said...

Hi, Jaime, Ed et all

A good sign of how far we are still of the right path are the first items on the budget that have been (slightly) cut: education and I+D, just those we need for the long term!

Mr Solchaga, former Chancellor of the Exchequer (or Minister of Economics), rightly said that only about 20-30 billion of the budget could be subject to cuts, being the rest personnel, procurement and interests.

No signs on the horizon that cut on these items are on the agenda.


Hynek Filip said...

Edward, I would certainly recommend that the "Spanish NAMA" project were put at the very bottom of your list.

In my opinion, it will become politically unfeasible to take all those (very reasonable) steps suggested under 2 and 3, if the "SNAMA" is ever established.

The average Spanish voter will be so outraged at the massive cost of "SNAMA" and the scale of mismanagement in the banking sector, that it will flatly reject any measures that may actually help the economy but may also cause additional pain to the ordinary voter.

If you do at least part of the internal devaluation process before SNAMA, the population may very well support such measures as unpopular, painful but necessary.

The Czech Republic actually had its own NAMA, the CKA, which was grossly mismanaged, cost about 20% of GDP and helped nothing.

Plus, the bank bailout and the CKA were extremely unpopular and, even a decade later, they are still widely used as an argument against any kind of meaningful reforms and austerity measures.

The argument usually runs like "If you did not lose those CZK 600bn in the CKA, we would not have to cut child benefits".

These days, even though it is quite certain that a few Czech banks will again need to be bailed out, nobody will even mention that until absolutely necessary.

By the way, you suggest that Spain should internally devalue only by about 20%. Given that most of its EU periphery competitors are already devaluing, and that Spain was not competitive to start out with, I would rather suggest to look at something in the 25-30% range. 20% will never be enough.