I don't think that it is so much that Spanish real estate is in such real trouble because the Spanish construction industry will be worse affected.
The fact is that there are 3 - 4 million unnoccupied properties in Spain and perhaps another 1,000,000 under construction or at the planning stage.
The bubble has burst and the boom is well and truly over.
Nevertheless, there seems to be as much interest as there ever was.
You don't even have to qualify that with "in certain areas" because everything has it's price.
The simple fact is that prices now have to adjust.
Most developers cannot afford to reduce prices. This is not so much due to the high cost of construction because that will come down when unemployment starts to bite.
The real problem is that they have paid too much for the building land and they are competing with a huge surplus of resale properties.
Only the most sought-after and unique properties will stand any chance of selling.
The resale market is another matter entirely.
Sellers who bought several years ago can afford to sell at "adjusted" prices. This won't bancrupt them, as it would a developer. They just have to take a smaller profit than they were expecting.
1,000's of borrowers are in default with their mortgages. Banks will have to foreclose on some of them and the properties will enter the market, either at auction or via estate agents.
Of course the banks or defaulters (as the case may be) will want them moved quickly.
This will start the ball rolling in the right direction and is exactly what happened in the 90's crisis - which happened for entirely different reasons.
The long term situation.
Buying is slow right now and this is because the international press is full of news about Spanish real estate "bubbles" and "crisis", so buyers are expecting prices to fall.
When buyers expect prices to fall then that is exactly what happens.
It is not like the UK market which has a shortage and people need a roof over their heads. Most buyers of Spanish property are buying second homes.
To summarise: As prices adjust a healthy resale market will emerge and that will take 2 to 5 years. It will be a lot longer than that before values recover to the point that new construction becomes economically viable.
Obviously the most sought-after areas and those offering something really unique will recover first.
ARTICLE: The Spanish Tourism and Real Estate Crisis.
