Foreigners might be buying more holiday-homes in Spain (see previous article) but it’s not enough to compensate for the collapse in Spanish demand for primary housing.

There were just 22,072 Spanish home sales in March (excluding social housing), 21pc less than a year ago and 28pc down in a month, according to the latest figures from the National Statistics Institute (INE).

2012 is turning out to be the worst year yet since Spain’s real estate bubble burst back in 2007, as illustrated by the chart above. Year to date the market is down 28pc on the same period last year.

The housing market in March was almost 70pc smaller than March 2007, when the boom was just starting to cool. Add in a price fall of, say, 30pc, and the market is down almost 80pc by value.

Unemployment heading for 25pc and a credit crunch in the Spanish banking sector help explain these remarkably awful figures.

The following table gives monthly house sales figures (excluding social housing) for the last 6 years. Click to enlarge.

Foreigners might be buying more holiday-homes in Spain (see previous article) but it’s not enough to compensate for the collapse in Spanish demand for primary housing.

There were just 22,072 Spanish home sales in March (excluding social housing), 21pc less than a year ago and 28pc down in a month, according to the latest figures from the National Statistics Institute (INE).

2012 is turning out to be the worst year yet since Spain’s real estate bubble burst back in 2007, as illustrated by the chart above. Year to date the market is down 28pc on the same period last year.

The housing market in March was almost 70pc smaller than March 2007, when the boom was just starting to cool. Add in a price fall of, say, 30pc, and the market is down almost 80pc by value.

Unemployment heading for 25pc and a credit crunch in the Spanish banking sector help explain these remarkably awful figures.

The following table gives monthly house sales figures (excluding social housing) for the last 6 years. Click to enlarge.

The biggest jump since 2002, taking the level of foreign investment in Spanish property back up to where it was in 2009, according to figures from the Bank of Spain.

What is driving this increase in foreign investment in Spanish real estate? At least part of it will be due to a significant increase in the number of foreigners buying holiday-homes and retirement homes on the Spanish coast, which some of the estate agents and developers I talk to have noted.

The biggest jump since 2002, taking the level of foreign investment in Spanish property back up to where it was in 2009, according to figures from the Bank of Spain.

What is driving this increase in foreign investment in Spanish real estate? At least part of it will be due to a significant increase in the number of foreigners buying holiday-homes and retirement homes on the Spanish coast, which some of the estate agents and developers I talk to have noted.

Monthly planning approvals for new homes are close to record lows, and might create a shortage in the next 5 years.

There were just 4,600 planning approvals for new homes in February, down 44pc on the same month last year, according to the latest figures from the Government (Fomento).

Compared to February 2006, when Spain’s building boom was in full swing, planning approvals are down 93pc. That just shows you how badly the Spanish house-building industry has been hit by the bust, as illustrated by the chart above. From being the driver of Spain’s economy it has collapsed to almost nothing, which helps explain why unemployment is close to 25pc and heading for 30pc.

As a result of the collapse in planning approvals, I believe there will be a shortage of newly-built homes in the next 3 to 5 years. This despite the fact that there is a glut of something like 750,000 newly-built homes on the market today.

The problem is that many of those homes are typical of what gets built at the peak of a boom: badly-built in a hurry, in undesirable locations, with scant regard to what house-hunters actually want. There is demand for new homes, just not those new homes.

As a rule of thumb, you should try to buy off-plan in the depths of the bust, not at the peak of the boom. In reality, though, most people do the opposite.

I forecast there will soon be a shortage, if there isn’t one already, of the kind of new homes that people actually want: better designed, better built, more generously-sized, more energy efficient, better located, and significantly cheaper. And that is what developers building today can offer.

The problem is, there are hardly any developers left standing, as you can see from February’s planning approvals.

Monthly planning approvals for new homes are close to record lows, and might create a shortage in the next 5 years.

There were just 4,600 planning approvals for new homes in February, down 44pc on the same month last year, according to the latest figures from the Government (Fomento).

Compared to February 2006, when Spain’s building boom was in full swing, planning approvals are down 93pc. That just shows you how badly the Spanish house-building industry has been hit by the bust, as illustrated by the chart above. From being the driver of Spain’s economy it has collapsed to almost nothing, which helps explain why unemployment is close to 25pc and heading for 30pc.

As a result of the collapse in planning approvals, I believe there will be a shortage of newly-built homes in the next 3 to 5 years. This despite the fact that there is a glut of something like 750,000 newly-built homes on the market today.

The problem is that many of those homes are typical of what gets built at the peak of a boom: badly-built in a hurry, in undesirable locations, with scant regard to what house-hunters actually want. There is demand for new homes, just not those new homes.

As a rule of thumb, you should try to buy off-plan in the depths of the bust, not at the peak of the boom. In reality, though, most people do the opposite.

I forecast there will soon be a shortage, if there isn’t one already, of the kind of new homes that people actually want: better designed, better built, more generously-sized, more energy efficient, better located, and significantly cheaper. And that is what developers building today can offer.

The problem is, there are hardly any developers left standing, as you can see from February’s planning approvals.

A new study by consultants Acuña & Asociados estimates there are almost two million homes for sale in Spain (see table above), which will take 10 years to sell.

The 2 million figure is comprised of newly built homes and resale properties, which means the total housing inventory on the market.

That sounds like a lot, but is it? It depends how it compares to the overall housing stock, and how that compares to other countries. It also depends upon the turnover rate – i.e. how quickly homes sell in Spain.

Assuming there are 26.5 million residential properties in Spain (there were 25.8 at the end of 2010, according to Government/Fomento figures), that means that roughly 7.5pc of the housing stock is on the market.

I don’t have figures from other countries to compare to (after a fruitless search), but I wouldn’t be surprised if it is a lot higher the EU average. All of which would suggest that Spain has a big oversupply of property for sale, compared to other counties. I’m sure many readers will be thinking “tell me something I didn’t know.”

Another way to judge the oversupply is to estimate how long the inventory might take to sell, using the current sales rate and estimates of future demand (household formation). Acuña & Asociados calculate it will take 10 years for the inventory to sell, assuming household formation of 200,000 a year between now and 2020.

10 years to turnover the current housing inventory (for sale) is a big problem that will be with us for years to come. All of which suggest that downward pressure on prices won’t go away anytime soon. Good news for (cash) buyers, but bad news for builders and vendors.

Acuña & Asociados also estimate there is a land-bank to build another 4 million homes, which won’t be needed for years. Guess who owns the land? Basically, the banks, either directly or indirectly.

If these figures are correct, how much do you think that land is worth? You don’t need an economics degree to work it out, and what it means for the balance sheet of the Spanish banking system.

The only way Spain is going to get out of this hole is a combination of 1) economic growth creating jobs and demand for homes, 2) selling lots more properties to foreign buyers, and 3) high inflation reducing the real value of debts and making property an attractive investment. I’m expecting the inflation, but I’m not so sure about the other two.

A new study by consultants Acuña & Asociados estimates there are almost two million homes for sale in Spain (see table above), which will take 10 years to sell.

The 2 million figure is comprised of newly built homes and resale properties, which means the total housing inventory on the market.

That sounds like a lot, but is it? It depends how it compares to the overall housing stock, and how that compares to other countries. It also depends upon the turnover rate – i.e. how quickly homes sell in Spain.

Assuming there are 26.5 million residential properties in Spain (there were 25.8 at the end of 2010, according to Government/Fomento figures), that means that roughly 7.5pc of the housing stock is on the market.

I don’t have figures from other countries to compare to (after a fruitless search), but I wouldn’t be surprised if it is a lot higher the EU average. All of which would suggest that Spain has a big oversupply of property for sale, compared to other counties. I’m sure many readers will be thinking “tell me something I didn’t know.”

Another way to judge the oversupply is to estimate how long the inventory might take to sell, using the current sales rate and estimates of future demand (household formation). Acuña & Asociados calculate it will take 10 years for the inventory to sell, assuming household formation of 200,000 a year between now and 2020.

10 years to turnover the current housing inventory (for sale) is a big problem that will be with us for years to come. All of which suggest that downward pressure on prices won’t go away anytime soon. Good news for (cash) buyers, but bad news for builders and vendors.

Acuña & Asociados also estimate there is a land-bank to build another 4 million homes, which won’t be needed for years. Guess who owns the land? Basically, the banks, either directly or indirectly.

If these figures are correct, how much do you think that land is worth? You don’t need an economics degree to work it out, and what it means for the balance sheet of the Spanish banking system.

The only way Spain is going to get out of this hole is a combination of 1) economic growth creating jobs and demand for homes, 2) selling lots more properties to foreign buyers, and 3) high inflation reducing the real value of debts and making property an attractive investment. I’m expecting the inflation, but I’m not so sure about the other two.