Spanish ghost town shows signs of life amid property recovery

31st October 2014

The tower blocks of Seseña rise from the flat Castilian landscape like giant ice shelves drifting in the sea. Close up, they seem just as forbidding – and almost as lifeless.

A vast housing project completed just as Spain’s decade-long housing boom turned to bust, Seseña has long served as a symbol of the country’s recent economic crisis. Even today, more than six years after the start of the crash, many of its 33 apartment blocks stand half empty. Arcades to house shops and bars are bricked up. The local park is deserted even on a sunny weekend.

Amid the desolation, there is one unlikely hive of activity: the real estate agency run by Mónica Solera. She has just shaken hands on a contract with a young couple. Two more clients hover in the background, but are forced to wait while Ms Solera answers a lengthy telephone inquiry. “Even the banks have started to lend again,” she says.

Similar sighs of relief can be heard in real estate offices up and down the country. After a long and painful collapse, Spain’s housing market is finally showing signs of life. According to official data, house prices rose 0.8 per cent in the second quarter, the first year-on-year increase in more than six years. Mortgage approvals in July were 29 per cent above the number granted in the same month last year. 

After years of reticence, foreign funds and local buyers are pouring money into Spanish real estate once again: according to some estimates, investment in the first half of 2014 is more than twice as high as in the same period last year.

“Demand is alive and it is growing. We have passed the low point,” says Luis Martín Guirado, the director of transactions at Sareb, Spain’s state-controlled bad bank. Created in late 2012, Sareb took over more than 40,000 properties from troubled lenders, and is currently pushing 800-900 units on to the market every month. 

The recent change, argues Mr Martín Guirado, reflects rising confidence and the fall in house prices – at least a third below their 2007 peak. “There are many people who kept their job during the crisis but who spent years worrying about losing it. Now they perceive that the economy is turning, they see that financing is available and that prices have fallen – so they trade up from a one-bedroom flat to a two-bedroom flat.” 

Signs of a turnround in the housing market are welcome news for Spain’s broader economy, which is no longer able to rely on exports alone to drive the recovery. Many of the country’s key trading partners in Europe are stagnating, which means output growth will increasingly have to be generated at home. 

Private consumption and factory investment are already on the rise. Construction could be next. Economists at the Bank of Spain believe investment in new building will decline slightly this year, but expect the sector to grow by 1.7 per cent in 2015. 

There is demand for more building in some areas, argues Neil Livingstone, a Madrid-based director at Colliers, the real estate company. “Since 2007, there has been no new high-end development either here in Madrid or in Barcelona. There is not enough supply,” he says.

That, however, is clearly not the case in many other parts of the country. At the height of the construction boom in 2006, Spain saw more housing starts than Germany, France, Britain and Italy combined. The frenzy left the country with about 650,000 empty apartments at the end of last year – an overhang that analysts believe will keep a lid on prices and new building activity for years.

“Excess supply will keep prices close to recent lows and the recovery will be slower than in recent cycles,” analysts at UBS wrote in a report last week. The investment bank said prices were indeed approaching a trough, but pointed to many other obstacles, including a projected fall in the Spanish population and the weak growth of disposable incomes. “The huge excess inventory will take years to be absorbed,” it concluded.

In places such as Seseña, where two-bedroom apartments sell for as little as €79,000, prospects for a rapid bounceback are clearly slim. But residents have noticed changes. 

Rosa Sanlazaro, who moved to Seseña last year, points out it now has a decent baker, which means she no longer has to drive to the next village to buy bread. More importantly the 66-year-old pensioner says the block is now “more than half full”.

Like the banks that took over most of the properties after the crash, Ms Sanlazaro continues to live in hope. One day, if the broader economic recovery remains on track, Spain’s biggest ghost town may be filled with life.

 

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