Like many economies, property sales and lending have collapsed in Spain but the situation is compounded by chronic overbuilding and opinion is divided over whether the country will slip into recession.
The most pessimistic outlook comes from Javier Ortiz, financial director of real estate organisation Grupo Inmo. 'If developers don't sell their flats 25 or 30% cheaper now, in two or three year's time they are going to have older, unmarketable properties,' he said. These properties will then be more expensive due to financial costs and 'they'll be forced to sell at 47% cheaper in real terms,' he added.
Two more leading developers are in crisis. Restaura SL (part of the Restaura Group) and Strength, have been forced to seek court protection from their creditors.
Restaura SL specialises in buying, refurbishing and reselling residential buildings in prime city locations, mainly in Barcelona. It has bought and refurbished some of Barcelona's landmark historic buildings and many of its clients are international investors.
The company, which has debts of €237 million spread between half a dozen banks and savings banks, is part of the Restaura Group, which has debts of €1.6 billion. Due to a lack of financing it has been unable to close crucial sales in recent months.
Restaura SL is also regarded as a victim of its own ambition, having expanded too quickly during the boom. Restaura, which has offices all over Spain, also opened offices in France, Germany and Poland.
The real estate developer Strength, which specialises in building holiday homes around Catalonia, has €100 million Euros in debts.
The International Monetary Fund said it expects Spain to move into recession in 2009. But the Spanish government is forecasting 1% growth. What happens is crucial for the property market as without economic growth there is no job creation, and without new jobs there are fewer buyers to help mop up Spain's monumental housing glut of over a million homes, many of them new.
