Spain = Japan 2.0

The research firm Variant Perception recently released a report comparing the Spanish housing bust to that of Japan. This article sums up the main point of the report:

• The crash is much worse than widely believed
• Spanish banks are hiding their losses by not marking loans to market value and extending credit to ‘zombie construction companies’
• Spain is in deflation which makes servicing debt really difficult. (Debt becomes harder to pay off when the value of money rises.)
• Germany, France and other parts of Europe will have to pay up to help Spain recover.
• Spain has as many unsold homes as the US but is 16 times smaller.
• Spain is 10% of EU GDP (Gross Domestic Product) but accounts for 30% off all new homes built in the EU since 2000.
• The overall value of outstanding loans to developers and construction companies is approximately €470 billion, almost 50% of Spanish GDP.
• Spanish unemployment is nearing 20%.

I was around when the bubble started and now we’re back in Spain again. If you take a look at idealista.es, the main site for finding properties in Spain, you’ll see that little has changed in terms of prices. There are some reductions in the worse areas, but not much overall.

A decent sized flat in a normal Madrid neighborhood is still over €300,000. The average Spaniard makes about €1600/month. Many only make €1000 eur, they are referred to as “mileuristas”. How does a milleurista by a €300000 euro home?

There is more interesting information about the Spanish market in this article sited. As for  Sally and I, we are renting in Madrid, saving as much as we can and waiting patiently for reasonable prices so we can buy our house to live in someday.