SPAIN - On a street corner in Tetuan, a working-class area of Madrid, hand-written "for sale" notices have faded to yellow as owners hold out months for their asking prices, refusing to believe that a nine-year property boom is over.
Having gained 190 per cent since 1998, one of the world's hottest property markets has finally succumbed to high lending rates, oversupply of a million homes in the past four years and prices that are up to 30 per cent overvalued.
Real estate agent Angel Velazquez says some homeowners in Tetuan have cut prices by up to 25 per cent to try to attract a buyer, while small property agencies have gone under after months without a sale.
"It's taking time for people to realise the boom is over, they think they can still make lots of money, but it's finished," Velazquez said.
Spain's economy is robust, with unemployment at a 29-year low, supported by strong euro zone conditions.
But tens of thousands of construction workers could lose jobs as residential construction slows. "If we're lucky, we're entering a period of house price stagnation around the level of inflation, which will include price falls," said Fernando Encinar, a director of Idealista.com, Spain's biggest online property advertising site.
Price declines could be sharper, and drag on longer, if firms continue to flood the market with new homes. Nearly a third of all concrete and asphalt covering Spain was laid in the past 14 years, as the country built homes and infrastructure and took per capita income to a level now close to the EU average.
A symbol of the boom is Sanchinarro, a higher-end neighbourhood on the sprawling northern edge of the capital.
Wealthier Spaniards sick of crowded, noisy inner-city living moved out to its blocks, while others went to out-of-town housing estates served by wide new highways built on EU development funds. On Spain's Mediterranean, holiday villas have mushroomed as hundreds of thousands of Britons and Germans bought property in the sun on easy credit.
More than 80 per cent of Spaniards' wealth is tied up in property, the highest level in Europe. Only 40 per cent of Spanish home owners have a mortgage, but over 90 per cent of the loans are on variable rates, leaving them exposed to rising interest rates.
Spain's coastal market has seen double-digit price declines. Existing homes in second city Barcelona lost 1.3 per cent of their value during the second quarter, according to Idealista.com. Only a year ago, ultra-modern, 70 sq m apartments in Sanchinarro would have been snapped up at €450,000 ($894,988) before they were even built. Today, apartments stand empty as Madrid homes take an average 200 days to sell compared with 100 this time last year. Prices are expected to fall across all areas of the city next year, with lower income neighbourhoods and new developments hit hardest.
Many Spaniards who bought houses as investments are heading for the exits. Guillermo Brincones hopes to sell his 120 sq m rooftop apartment in Madrid's new Las Tablas neighbourhood.
"You're starting to see assets that are much more attractive investments than property," said Brincones.
Spain has plenty of potential buyers from the arrival of 4 million immigrants since 2000 and higher employment among the young and women. The problem is that many are now priced out of the market.