Spain Property: Oversupply Will Cause Prolongued Correction in 2009

The annual report into European housing markets by the Royal Institute for Chartered Surveyors paints a bleak picture for Spain property in 2009. 2008 saw new developments fall by only 4.1% on the record 641,400 seen in 2007, despite demand falling sharply during 2008. The RICS report said:

"Transactions were down by 30% year-on-year in 3q 2008. Housing starts were down by almost a half in June 2008 compared to the year before as developers dramatically cut back output. In contrast, completions were actually up by a third on the year because developments from the previous period of high output were still being built out. This continuing flow of new stock onto the market has been exacerbating an already significant supply overhang."

Failing to see the warning signs, Spanish developers continued to build developments based on the numbers of foreign second home buyers. Right up until Mid 2008, new development was proportionately far too high for a country of Spain's size but for the foreign buyers. These developments are due for completion in the next two years, and overseas buyers are nowhere to be seen. This, "new supply will continue to put downward pressure on prices and further substantial falls in building are to be expected," said RICS.

None of the above seems to marr Spain property's popularity with overseas buyers. Several recent property charts have shown Spain staying in the top ten of most popular destinations with overseas property