Five years after Spain's property bubble burst, hundreds of thousands of new and unfinished properties remain unsold throughout the country. Meanwhile, some of the biggest companies in the world have had to eat humble pie, reduce their size, and in some cases have simply been swept away.
Slowly, and reluctantly, the property sector is facing up to one of the major reasons nobody is buying property: the huge numbers of homes that remain unsold, some of them unfinished. This is the case for the major financial institutions, as well as Sareb - the so-called "bad bank" set up to sell the vast portfolio of real estate accumulated by failed, and subsequently nationalized, banks after the property companies they had financed went belly up.
Estimates of the number of unsold houses range between the government's figure of 675,000 and the 815,000 calculated by savings bank CatalunyaCaixa. To this figure also needs to be added the close to half-a-million homes that are still under construction, according to both the government and the real estate sector. The areas with the largest number of unsold properties are, in order: Castellón, where one in four homes is empty according to CatalunyaCaixa; Toledo; Murcia; Almería; Tarragona; La Rioja; Alicante and Malaga.
Investment funds and foreign buyers have stepped in to take advantage of the drop in property prices, but sales are still far too slow to absorb the country's huge housing stock. The government says that in the first quarter of the year, 23,118 homes were put on the market, a figure that pales in comparison to the boom years of the first decade of the century, when around 300,000 properties were being built each quarter. But there does not seem to be much appetite even for such a small number: up to June of this year, house sales were 20,770.
In March, Sareb approved a business plan setting aside 103 million euros for demolition. The figure is smaller than that earmarked for maintenance work (130 million euros) or the 133 million euros for ongoing construction. Sources at Sareb say that only unfinished buildings will be knocked down, and that demolition will not take place immediately.
The property sector and Sareb are now fully focused on selling the country's housing stock - at least those properties that are finished.
In Spain there are thousands of homes still under construction, many of which are little more than shells that have been abandoned for years.
The wear and tear on the buildings would justify their demolition, given the high maintenance costs, and the impact they are having on the price of neighboring properties.
The Mortgage Victims Platform, set up in the wake of the property crash to protect people unable to pay their mortgages, who not only face being kicked out of their homes but also having to return the money they borrowed, has highlighted the growing problem of homelessness in Spain. It recently occupied a property that is part of Sareb's portfolio in the town of Salt, in Girona province. The European Court of Human Rights halted procedures to have the squatters evicted. Sareb's proposed demolitions are based on economic criteria. The company, which is 45 percent owned by the taxpayer, has been given 15 years to get rid of its toxic assets inherited from nationalized savings banks, and for any money it makes to be returned to the public purse.
Other voices say the banks, the real estate companies and Sareb should not make their decisions solely on economic criteria. "We also have to take environmental factors into account," says Lola Yllescas, a spokeswoman for the Andalusian branch of environmental NGO Ecologists in Action. She and her organization are fighting Sareb to protect land in El Palmar, close to the town of Vejer de la Frontera, in Cádiz province. Part of the land was owned by failed savings bank Caja Madrid, and then passed on to Bankia, the entity that was created in its wake. The idea was to build a tourist complex on the land. The site is now available for next to nothing.
In any event, it will be some time before Spain's construction industry recovers. The country's banks are determined to reduce their exposure to the property sector by cutting back on lending to real estate companies, as well as doing all they can to sell off their housing stock. It is unlikely that work will begin on unfinished properties in the short term. The experts say that as the housing stock is gradually reduced, the matter of what to do with half-completed properties will be addressed. In some cases, the demolition crews will be called in.