Spain's ghost towns and half-finished developments could finally start to see life, as falling prices in the country's embattled real estate sector begin to signal the end of a seven-year slump, says ratings agency Fitch.
The signs of recovery are down to a return of mortgage credit, which dried up following the global financial crisis in 2007-8. However, Spain still has a long way to go: High unemployment rates and a surplus of properties will prevent rapid price growth. In Spain, around 768,000 houses built between 2002 and 2011 remain empty, according to the Spanish Statistical Office (INE).
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Following the global financial crisis, Spain's speculative property bubble, which saw thousands of new homes built across the country and house prices rise 44 percent from 2004 to 2008, burst. This sent property prices plunging, banks to the brink of collapse on large numbers of unpaid mortgages and modern-day "ghost towns" of unsold properties.
At the Sesena development near Madrid, less than half of the 13,000 apartments meant to make up the development were built. In Yebes development, also close the capital, only 1,500 of the projected 9,000 apartments were built.
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"The house price and mortgage market stabilisation reflects Spain's macroeconomic recovery and banks' increasing willingness to lend," Fitch said in a statement. While the European Central Bank's Targeted Long-term Refinancing Operations will increase the cheap money available to Spain's banks, this won't lead to a large increase in mortgage lending.
The Spanish economy grew by 0.6 percent in the second quarter of this year. This is in contrast to Euro zone growth as a whole, which was stagnant during this period. Germany had posted a shock 0.2 percent contraction while the French economy stagnated.
Billionaire investors have also smelled the first signs of life in the property market. Hedge fund kings George Soros and John Paulson have stakes in Spanish property, after investing in real estate investment trust (REIT), according to a regulatory filing earlier this year. Microsoft's founder Bill Gates also bet on the country's construction sector, buying 6 percent of Spanish construction company FCC for 133.5 million euros ($155 million) last year.
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Spain's economic woes had been preceded by a long boom period, which started after it joined the Euro in 1999. During this time it had enjoyed good growth and a roaring property sector. In the four years from 2003, Spain's economy grew at an annual average of around 3.6 percent, according to the World Bank. However, at the onset of the global financial crisis in 2008, it grew at just 0.9 percent.