Spain's Housing Crisis
A common misconception amongst many Americans is that the housing crisis is something happening in our county exclusively, however Spain’s housing crisis has some of the same roots as the one we are experiencing at home. So much so that the housing crisis in Spain has created ghost towns. High rise apartment buildings lining the streets of newly formed residential areas go uninhibited as many are being booted out of their homes due to delinquent mortgage payments and nowadays just like in America, no one is really in the market to purchase new property, thus leaving investors scrambling to unload their ill-timed real estate investments at only a fraction of the cost. So whats the reaction from the citizens?
Spain’s Housing Crisis | The Abandoned City of Sesena
Sesena, a town an eye’s reach to Madrid, has become a ghost town. Parking lots are covered in knee high weeds, unkempt apartment buildings loom stories high waiting hopelessly to be occupied, but its a dismal hope. Prices in Sesena have dropped to an all-time low but still just as it is here, the average person cannot qualify for a loan.
The Christian Science Monitor reports on the ghost town of Sesena and extent of the housing crisis in Spain.
More than 13,000 apartments were supposed to go up to create a mini-city for 30,000 people just 45 minutes outside of Madrid. But only 5,100 were built, many are uninhabited and regular Spaniards who bought them as investments are now competing to offload them for huge losses.
In Sesena and other ghost developments around Spain, some banks are already trying to unload finished apartments at discounts of up to 50 percent of their original prices.
The whole situation is very reminiscent of a small town named Muang Thong Thani built on the outskirts of infamous Bangkok during the Asian debt crisis in 1997. Documents report that this small condo filled Asian municipality still for the most part has apartment buildings, department stores, and other buildings lifeless with no occupants since the late 90s economic collapse.
Spain’s Housing Crisis | The People Revolt
Citizens of Spain aren’t taking this sitting down, much like the Occupy protests here in the United States, thousands of angry Spaniards are out in masses protesting the banks that are repossesing homes at an alarmingly fast rate.
The BBC explains their defense in their report on the Spanish housing crisis:
Tatyana Roeva was one of the protesters who went to the house the night before the eviction.
Protester Tatyana Roeva says people were “tricked” into taking out loans“Surely someone who enters into a mortgage has a duty to meet their payments?” I ask her.
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“I don’t agree, because we were tricked. They created a property bubble and they gave mortgages to everyone. It was a fraud in every sense of the word.”
There is some evidence to suggest that this is in fact the case and irresponsible lending on the bank’s behalf occurred some years back, however Spain’s banks have a much different story to tell.
Savings banks, known in Spanish as “cajas”, issue more than half the total value of mortgages in Spain.
One of the biggest problems for the savings banks is the amount of property they own. Many of them are now referred to as “bad assets” because their value has fallen so sharply.
However the Confederation of Spanish Savings Banks (CECA) rejects the notion that, prior to 2008, its members were guilty of irresponsible lending.
“I think we should take into account the climate in which lending contracts were issued,” said Antonio Romero from the CECA.
“They took place at the peak of the cycle in the Spanish economy, when credit was easy to get and when the unemployment rate was really low.”
Spain’s Housing Crisis | We’re Not So Different
Although this was merely a glimpse or a brief synopsis of the current economic climate in Spain specifically the housing crisis, I wanted to share this story with you so that you could broaden your perception of the current housing crisis by taking a look at one occuring in another country from an objective standpoint. I’d love to hear your thoughts on the housing crisis as it relates to either Spain, America, or the world as a whole.
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