A boom/bust example of property

[Springbok]

Think property prices always go up, with the odd slow-down occasionally? Then read this:

Builder in Spain Crashes, Founder Keeps New York Pad (as always, just the really rich who go through these events relatively unscathed...)

"From the looks of things at the newly built Aparta Hotel Residencia, you'd never know that it's the high summer tourist season in Canet d'En Berenguer, a town of 5,000 just north of Valencia on Spain's Mediterranean coast. The compound's 308 apartments, completed this spring, are all unoccupied. Grass has started to sprout between the red terra-cotta tiles that lead to the empty, peanut-shaped swimming pool.

"The residence is just one of a trail of buildings dotting the sandy coastline constructed by Enrique Banuelos as he amassed a fortune of more than 4 billion euros ($5.4 billion) over the past 15 years. Banuelos lost much of that money -- and shareholders' -- as the stock market punished the firm he founded, Astroc Mediterraneo SA, amid a rapid cooling of Spain's housing market.

"Astroc shares lost 89 percent from their Feb. 26 peak of 72.60 euros on the Madrid Stock Exchange, when the company had an implied value of 8.8 billion euros, to their July 24 low. On July 26, when Banuelos resigned as chairman, shares rose 39 percent. He'd already given up day-to-day management.

"On Aug. 10, Astroc reported a net loss of 65.7 million euros for the first half of 2007.

"Astroc's decline tells a cautionary tale about what was once Europe's fastest-growing real estate market. Spanish house prices have surged since the 1990s, fueled by a drop in interest rates, increasing incomes and a boom in vacation home purchases by Germans, Britons and other Northern Europeans.

"Like overheated markets in the U.S. and elsewhere in Europe, Spain's building boom came tumbling down once interest rates rose.

"Astroc and two other Spanish real estate companies, Madrid- based Metrovacesa SA and La Coruna-based Fadesa Inmobiliaria SA, had together lost 9.1 billion euros in market value this year. 'There are about 60,000 real estate firms in Spain, and 75 percent of them are disasters that will vanish,' Rodriguez de Acuna says.

"Size may not be enough if Spain's real estate slowdown turns into a full-blown recession, as Alberto Espelosin, chief analyst at Ibercaja Gestion SA, a Zaragoza, Spain-based investment firm, predicts. 'Banuelos wasn't a poor manager; he was a victim of the bursting of Spain's real estate bubble,' he says."