Spain Weighs Home Demolitions as Wrecking Crews on Alert

Angel Navarrete/Bloomberg

Spain is counting the cost of the collapse of a decade-long property boom thats sent home prices falling about 30 percent since the start of 2008, driven unemployment to 26 percent and burdened banks with mounting bad loans that have made them wary of extending new credit.

Demolition man Daniel Anka had a staff of 450 in Spain preparing for new developments before the property crash. With about a 10th of that workforce left, hes now waiting for a call from the countrys bad bank so his trimmed-down crew can start knocking down half-built homes that arent worth completing.

Anka may not have long to wait as Sareb, the unit holding soured real estate assets from Spains nationalized banks, orders work to stop on about 160 of the 650 partially-completed building projects on its books and decides which ones are worth completing. A small number of them may be demolished, said two people with knowledge of the matter, who asked not to be identified by name because it isnt public.

We expect the bad bank will start to seek bids for some demolition projects starting this summer, said Anka, chairman of Madrid-based Anka Demoliciones and vice-chairman of the Spanish Association of Demolition Businesses.

Spain is counting the cost of the collapse of a decade-long property boom thats sent home prices falling about 30 percent since the start of 2008, driven unemployment to 26 percent and burdened banks with mounting bad loans that have made them wary of extending new credit. A decision by Sareb to raze unfinished properties would demonstrate it makes more sense to knock down homes than try to sell them as an economic slump drags into a sixth year, said Fernando Rodriguez de Acuna, a project manager at Madrid-based real estate consultant RR de Acuna & Asociados.

If demolitions start in sizeable volumes, that could be a positive sign because it would be a recognition that its impossible to sell these assets under any circumstances, Rodriguez de Acuna said by phone. At least if you knock them down, the land can be put to some other use.

Spain set up Sareb last year to absorb the souring real estate assets of eight lenders including the Bankia (BKIA) group that took a combined 41 billion euros of state aid as the government sought European funds to help clean up its banking system.

Sareb has taken on about 200,000 assets. This includes 107,000 properties, 76,000 of which are empty homes, Economy Minister Luis de Guindos told Congress in March. The bad bank plans to sell assets with a value of 1.5 billion euros ($2 billion) this year, he said.

Bids for the first group of properties to be sold, known as Project Bull, were due by July 18, according to a spokesman for Sareb who asked not to be named in line with its policy. No decision on the sale has been made, the spokesman said.

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Spain Weighs Home Demolitions as Wrecking Crews on Alert