To put things in perspective, Spain now has as many unsold homes as the US, even though the US is about six times bigger. Spain is roughly 10% of the EU GDP, yet it accounted for 30% of all new homes built since 2000 in the EU. Most of the new homes were financed with capital from abroad, so Spain’s housing crisis is closely tied in with a financing crisis.
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Spain is vacationland. I do think you have to make a distinction between the real spanish property market and the ones sold to expats.
Yes, the real market is overpriced as well, but spanish families hang on to property. middle class families may own 6-7 flats through inheritance and not selling old ones. rental markets are terrible so they get let out to unemployed family members and so on.
The expat market is a war zone, but I don’t know how much the spanish banks are lending there.
In any case, remember spanish banks get rich off south americans keeping their money there. the amount of drug money must be staggering.
@alejandro; sorry, I use middle class when I should say “upper-middle class”. Given the amount of opus dei families I see they clearly need 6-7 houses for each family. And yes, I realize that every middle class family in spain doesn’t have a minivan, although in the north of madrid it just looks that way…
Charlie makes more sense than it might seem at first glance. Spain’s society has a major division between the haves and the have nots: While there’s millions of young mileuristas, having trouble making ends meet, there’s also an entire class of people that seemingly collects property, without ever renting it away. In many cases, it’s people that still has very good incomes, and might be paying for multiple mortgages.
They are not the ones that can’t afford the mortgages, but their finances will take quite a hit when all their property plummets in value. But given that they have little need for liquidity, chances are that all that will happen to them is that they won’t sell any of their property for a decade. That’s the main reason we are not seeing massive property price drops yet: The number of people with a home that can make payments but want to sell is tiny.
Tyler, if instead of visiting Barcelona you got to spend time in less populous provinces, you’d see that, when it comes to how economic activity is done in Spain, things are not all that different from southern Italy.
Foreign population in Spain (Wikipedia):
1998: 923,879 (1.60% of total pop.)
2008: 5,220,600 (11.3% of total pop.)
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