Spain faces major crisis

Major developers in Spain are now crashing under the pressure of the country's worst property downturn. The future of thousands of homes under construction are now in doubt.

Spanish property developer Martinsa-Fadesa yesterday became the first major victim of Spain's housing crisis when it filed for bankruptcy amid warnings that more are expected to follow.

It is the first large property group in Spain to seek protection from its creditors since the bubble burst on the country's once-booming real estate market late last year. And it won't be the last. The head of Spain's property developer association, Jose Manuel Galindo, predicted more bankruptcies in the sector.

'Even though we have no concrete data from other property firms, other cases such as this could occur,' he said.

Major property group, Colonial, is also in trouble after declaring more than €8.9 billion in debt at the end of 2007. A takeover bid by the Investment Corporation of Dubai fell apart but the group later announced it had the backing of major creditors to continue doing business.

Several small property firms have filed for creditor protection and recently Barcelona-based Habitat only refinanced a €1.6 billion loan the day before its deadline.

Despite trying to re-finance Martina-Fadesa was unable to obtain a loan of €150 million needed to keep going. It has debts estimated at €4 billion and assets worth €10.8 billion. Trading in its shares have been suspended and around a quarter of its 880 workforce are expected to be laid off.

It has investments in houses, holiday resorts, golf courses and shopping malls. They include a major development of apartments in Sofia, Bulgaria. The construction of 2,531 homes on the Costa del Sol is also now in doubt.

In a further sign of the slumping property market the latest figures from the Spanish housing ministry show that house prices fell in real terms year-on-year for the second consecutive quarter.

The crisis is affecting other businesses connecting with the construction industry. Roca, one of the world's largest producers of bathroom ceramics has axed almost 400 jobs in Spain due to the downturn in the property sector.

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