Construction companies will add 385,000 houses to surplus housing stock
The surplus housing stock which construction companies have accumulated and for which they are finding it difficult to off load is now the number one problem for those in the housing sector. An internal report compiled by the Ministry for Housing and released by El Pais today has for the first time not only issued a figure for the number of surplus housing stock (houses and flats already on the market) but also those that are currently in the process of being built. The figure is almost one million – more precisely 997,562. Some experts believe that a number of newly built houses and flats will never be sold.
The report holds a great deal of information on the immediate past and the future for the housing sector. At a time when demand is being stifled by the difficulties in obtaining credit, the increase in unemployment and the expectation that property prices will drop even further the market has in effect found itself in a state of paralysis.
This paralysis has led to the number of newly built properties coming onto the market rising rapidly. At the end of 2007 the surplus housing stock numbered little more than 400,000. However, by the end of 2008 it grew to 613,512 units. That is an increase of 51% in just 12 months. To exacerbate the problem even further almost half of the surplus stock of new housing is located along the Spanish Mediterranean coastline.
It is clear that construction companies will find it difficult to get rid of houses and flats which during the boom years were sold at planning stage. Government initiatives such as those to convert privately built flats into state subsidised housing are not working. However, if construction companies think they have problems now worse is yet to come because many of the houses and flats under construction in 2008 are now arriving at their completion stage which means that they will soon come onto the market.
Out of 626,000 properties being built just 243,000 have been sold.
This is where the figure of a million comes from – adding the 613,000 properties already on the market to the 385,000 under construction which have not been sold yet. The pessimistic outlook for the housing market means that many houses and flats under construction will never be completed. But it is hoped that those in their final stages of construction will be completed.