Spanish Property Market – over 1 million empty new houses!
Novi Property Mallorca
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According to a new report from the Instituto de Práctica Empresarial (IPE), experts in the Spanish real estate sector there are nearly 1,050,000 unsold newly built homes on the market with concerns that this could rise to over 1,200,000 by 2012 if there isn’t a turn around in the market soon.
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The latter seems unlikely when one considers the unabated rise in Spanish unemployment levels and the important face that sustainable affordability ratios are a long way from sight. Although much hope is pinned on a return to some form of “normality” in the mortgage lending markets it is difficult to see a return to the lending practices of the boom years where 100 – 120% loans were common place.
With LTV ratios likely to remain for the foreseeable future at the 60 – 90% mark (the latter for residents meeting only very special criteria) buyers are going to need very significant equity deposits to be able to buy. Furthermore with taxes / buying costs so high (circa 10% of purchase price) there is a reluctance to sell where the automatic result is a “paper loss” of 10% on the transaction with little prospect of growth in underlying values to cancel this out. The result is an illiquid market.
While oversupply in the Mallorca market is by no means as problematical as those of Valencia and Andalucia, the two worst effected areas, the problem will still act as a drag on the market along with the fundamental problem of affordability perhaps the main problem undermining demand on the Island.
For further news, views and opinion regarding the Spanish and Mallorca Property Markets please see the "Mallorca Property News" web site and top Blog the "Mallorca Property Market Blog".
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