Spanish Ghost Towns, Covered By Bbc's

[stuckmojo]

Blog

Village is neat and well-manicured for a ghost town. The complex near Sesena Nuevo, some 30 miles south of Madrid, should be home to around 40,000 people, but as I wander around I hardly see a soul.

Will places like this be the key to next week’s General Election?

The climbing-frames and swings in the playground are in bright primary colours, their shine unscuffed by children’s feet.

No one disturbs the unbroken views across the park, with its neat line of spring flowers, shaded areas and rows of palm trees.

No one stares across the large crescent-shaped lake at the 100-foot high fountain.

Three sides of a large, new and modern block of flats, brown brick and big balconies, curve round a wide-open space complete with a court of ball games and a large swimming pool.

Not a splash, not the bounce of a ball disturbs the peace of the late morning.

Science fiction movie

In fact it’s rather like some science fiction movie about a happy town where the whole population has been spirited away by some unknown alien force.

I am not, however, investigating anything quite so melodramatic, but how the economy is playing in Spain’s general election which takes place on 9th March.

I’m told that until now both Spanish politicians and voters alike treated the economy like a force of nature but now “it’s the economy stupid” is true here too.

So the population of this town has not disappeared but simply never arrived, or at least has yet to do so.

The development of 13,500 flats is one of the largest in Spain. On one of the well laid-out roundabouts is a statue of a man and a woman, looking a little like Prince Charles with his arm around a younger Mrs Thatcher.

This is Francisco Hernando and his wife. His is an amazing story.

Richest man

He is said to be Spain’s richest man from very humble beginnings. According to Spanish financial papers, he can’t write and can barely read, yet has made a fortune, originally building sewerage systems.

This project is his brainchild, a plan to provide relatively low-cost housing in a country where many people cannot afford to take out a mortgage in the first place.

From a distance, in the smoggy air, this could be mistaken for a boom town.

Tall cranes loom over half-built apartments marching across the plain.

But look for a little while and none of the cranes moves an inch. No ant-like workers are scurrying around their base. Work has stopped on the latest stage of this project.

Although there are some local political problems the same is true all over Spain. It is not just at siesta time that the machines stand idle.

'For Sale'

Eventually I catch sight of a man hanging out a “For Sale” sign out on the balcony of his fourth floor flat.

We have a shouted conversation until he comes down to talk. He seems happy to do an interview until he learns were British: he wants publicity in Spain.

He bought the flat as an investment but hasn’t been able to sell it as yet. He tells us the economy has definitely slowed down, but he is confident that he will sell in the end, it’ll just take more time..

The director of urban development at Madrid’s International Business School, Dr Gildo Seisdedos, tells me the problems here are typical.

For many, Spanish property means not a home but an investment. There has been a huge, continuing building boom for years. Some of the statistics are staggering.

More new homes were built in Spain in the last five years than in France, Germany and Britain put together.

Half the cement made in Europe ended up in Spain. But Dr Seisdedos says builders used their profits to reinvest and build more. Because of the worsening economy, including rocketing food prices, people aren’t buying.

So there’s no money to invest and the banks aren’t lending because of the world crisis. It’s a perfect storm, he says.

And it matters because so much of the Spanish economy is tied up with construction. When the cranes stand idle it means unemployment is going up.

Investment property

Back at the flats, I finally spot a really live resident. Eugine Nicholov, who’s originally from Ukraine, is out kicking a ball around with his curly-haired little girl and his wife.

It would make a good picture for an advert. He bought their flat six years ago and moved into it as soon as it was ready last September.

He says of the 290 apartments in this block only about 50 have been bought. He says very few people actually live here, for most it’s an investment.

There are a few more people around at the weekends, but there are only a handful of cars in the underground garage and you need a car to get around here.

I say that it must be very odd living in a place like this. Eugine replies that it’s not as bad as you’d think, it’s very peaceful and you don’t get disturbed by noisy neighbours.

Burst bubble

But he says the property bubble has definitely burst and if he had to sell up now he’d lose money.

There’s an advert taped to a lamppost. The man at the other end of the phone, who lives in Madrid, says he’s got 12 flats and is selling at less than cost price.

He is in this for the money and would, of course, sell for more if he could. But he thinks they will shift in the end.

I hope you know I always welcome your comments: but more than ever on this story, which I won’t be broadcasting until next week just before the elections.

Am I right that the economy is the big issue in these election? Is property the key? What about unemployment and food prices? If you live in Spain, or know it well, how does it feel to you?

Spanish meltdown anyone?

[Extradry Martini]

Blog

Spanish meltdown anyone?

Good link. I have sent him the following comment:

The Spanish real estate market at the end of 2006 was at 13 times average earnings (compared with 7 in the UK), making it the most extended property bubble in the western hemisphere since the 1920’s Florida boom. More than a third of Spanish GDP comes from construction or businesses which serve it. In the meantime, Spanish exports (including tourism) have gone from being very competitive in 1999 to uncompetitive now. Without the ability to devalue its currency, the only way that Spain can become competitive is through a long protracted period of unemployment and deflation. While this scenario (the only realistic one for the future) has yet to begin properly to play out, members of the financial community in Madrid are beginning to speculate in private about whether the current batch of politicians have the political nerve to go through with it.

The alternative, of course, is to remove Spain from the euro, re-create its own currency and devalue. By doing this, Spain will have defaulted on its government bonds (because the denomination into euros was “irrevocable”, therefore a redenomination into anything else is an event of default), as will have any corporate bond issuers who redenominated their bonds, which will likely be all of them.

An exit from the euro is still not being talked about as a most probable outcome, but many of us see it as a much more probable outcome than is believed by most. The consequences of it are potentially horrible (not least for the euro experiment itself, as the politicians will inevitably, and correctly, be blaming design flaws in the euro), but they may be better for the Spanish economy than those of doing nothing.

[Paddles]

Good spot.

I know two people in deep in Spanish property, and satisfyingly, they're both complete c***s!

[Havoc]

Here is the Link if you're interested in buying one. Place looks like a giant hotel complex.

[OnlyMe]

It would make a good picture for an advert. He bought their flat six years ago and moved into it as soon as it was ready last September.

WTF???

Who on earth would wait this long unless tied by a hideous contract that let the developer slip for years and why would a developer want to keep things up in the air so long - surely not to ensure that resales couldn't hit the market at a market price?

[skomer]

Here is the Link if you're interested in buying one. Place looks like a giant hotel complex.

To me it looks like one of the housing projects you find around East European or Russian cities built by the communists or one of the banlieue around Paris. And its still 38km outside Madrid! I really hope the Spanish economy doesn't go t**ts up they dont deserve it but it looks like they've been snookered and i cant see anyway out without some form of devaluation

Edited February 28, 2008 by skomer

[stuckmojo]

I lived in Tres Cantos, north of Madrid, which is one of those towns. The place is ghastly.

I posted this article as I think it represents perfectly what is going on in the Spanish economy: they are **Cked

[FernandoMorientes]

Wow...I see what you mean that really is a hideous looking development devoid of any character or soul.

Here is the Link if you're interested in buying one. Place looks like a giant hotel complex.

[TheCountOfNowhere]

The Spanish real estate market at the end of 2006 was at 13 times average earnings (compared with 7 in the UK), '

say no more.............uh oh

In reality the Spanish real estate market at the end of 2006 was at 7 times average earnings, because it's only the stupid brits and germans that are buying there.

[Extradry Martini]

In reality the Spanish real estate market at the end of 2006 was at 7 times average earnings, because it's only the stupid brits and germans that are buying there.

I can never understand why people bother to contradict when they have absolutely no idea. Why not just check your facts before you do so? How can form an opinion without having your facts right?

No, in reality the Spanish real estate market was at just below 13 times earnings. And the bubble had very little to do with Brits and germans - this was as domestic a property bubble as any other.

Ok, you can get house price data from the Ministerio de Vivienda here, and you can get average salaries from the Instituo de Estadísticas here. To save you time, attached is a chart of Spanish house prices v average earnings.