Thread: Spain Ghost Towns, Shadow Inventory, Cooked Books

Saturday, December 18, 2010 2:39 AM

Spanish "Ghost Towns", Shadow Inventory, Cooked Books; Spain's 2011 Real Estate Funding Crisis

In Spain, huge projects are completely empty and bad debts mounts as the Spanish banks play extend-and-pretend with developers. That game is about to end.

Developer loans are coming due. Yet, there is no way for developers to make interest payments let alone pay any principal. When developers collapse in 2011, banks will be stuck with a vast amount of undeveloped land at overvalued prices as well as ghost towns so far outside of major towns that no one will live in them.

A flood of inventory awaits a death of buyers. Moreover, a huge amount of shadow-inventory is waiting on deck, hoping for better prices so the owners can bail. Unfortunately there is no one to bail to. Spain's official unemployment rate is 20%, and it's quite likely the real unemployment rate is higher.

On top of that, Spain has to deal with various austerity measures. There is no way for it to grow out of its problems.

Many are starting to realize Spain is massively understating the problems its banks, and Spanish banks books are cooked. That has been my position all along. The New York Times offers evidence in Newly Built Ghost Towns Haunt Banks in Spain http://www.nytimes.com/2010/12/18/world ... ss&emc=rss

It is a measure of Spain’s giddy construction excesses that 250 row houses carpet a hill near this tiny rural village about an hour by car outside of Madrid.



Most of these units have never sold, and though they were finished just three years ago, they are already falling into disrepair, the concrete chipping off the sides of the buildings. Vandals have stolen piping, radiators, doors — anything they could get their hands on.

The Bank of Spain says the banks have about $240 billion in “problematic exposureâ€

Spain did like the U.S. does. The E.U. or European Union tried to displace the citizens and import illegal aliens from N. Africa and Turkey-and now we can see that Spain is looking like a 3rd world african country in the same manner that the U.S. will look like Mexico