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Glut of new properties in Spain unlikely to be cleared before 2011

It is estimates that there are almost a million new homes that are unsold, most on the Spanish coast, many of which were built for British property investors who have now deserted the market because of the global economic downturn.

According to the Institute of Construction Technology any property finished by developers in the next year will join Spain's inventory of unsold new homes.

Because long lead times and inertia are endemic in the Spanish construction industry the glut is just going to get bigger and the firm estimates that around 600,000 homes have been completed in 2008, despite a severe slump in property sales.

'In 2008 there has been a lot of work, almost as much as in the best years of the property boom,' said spokesman Josep Fontana.

Its report forecasts that the number of finished homes will fall to 300,000 in 2009, a 50% drop in output, before stabilising with a 2% fall in 2010. That would take residential construction levels back to where they were in 1996 and 1997, before Spain's real estate boom kicked off.

Meanwhile the latest forecast from BBVA, one of Spain's largest banks, predicts that property prices will fall by 25% by 2011. Swiss banks Credit Suisse and UBS have already forecast falls of 30% in a similar time frame.

BBVA also estimates that the inventory of new homes languishing on the market in search of a buyer stands at between 800,000 and 1.4 million, somewhat higher the Ministry of Housing's estimate of 650,000 unsold new homes.