With its empty streets and deserted playgrounds, the sprawling “Francisco Hernando” residential area of the town of Sesena has become ghost town — and a symbol of the collapse of Spain’s property market.

Named after developer who designed and built it, the urbanisation in an area of scrubland some 40 kilometres (25 miles) south of Madrid was supposed to have 13,500 apartments, a football pitch, swimming pools and a park.

But less than 1,000 apartments have been sold and only 3,500 are expected to be completed as rising interest rates, the global credit crunch and oversupply have saddled him, like other developers across Spain, with unwanted properties.

In block after block, blinds remain firmly shut on apartment windows in the largely unoccupied buildings of different heights while “For Sale” signs dot scores of windowsills.

As he stands behind the brand new counter of his restaurant, which has been open for just one month, Ivan admits he feels a bit alone.

“With the crisis, we can see that the neighbourhood will not get full,” he said.

The owner of one of the development’s few groceries located on a parallel street was a bit more optimistic.

“Business is growing bit by bit,” she said.

About 80 percent of those who put down a deposit on an apartment in the area planned to re-sell it quickly and make a profit without ever living in the property, said University of Alcala de Henares economist Julio Rodriguez.

“But when the apartments were finished, the market had changed and the majority finally went back on their decision to buy,” the Spanish property market specialist told AFP.

One-third of the more than 1.8 million new homes which were built since 2005 in Spain have yet to find a buyer, Rodriguez estimates.

Spain’s property boom was a key source of jobs and it allowed the country’s economy to grow at a faster rate than the rest of the eurozone before it started to collapse late last year.

Mortgage lending in Spain, as measured by the amount of money disbursed, fell 38 percent in August from the same time last year, its 13th consecutive month of declines, national statistics institute INE said last week.

The housing collapse has led some heavily indebted property groups such as Martinsa-Fadesa to seek protection from creditors and it has spread to the rest of the economy, pushing the unemployment rate to 11.3 percent in the third quarter, the highest rate in the European Union.

The Spanish economy, the fifth-largest in Europe shrank by 0.2 percent in the third quarter from the previous quarter, the first such decline in 15 years, the Bank of Spain said Friday.

Despite the downturn in the housing market, some like Belen, a 40-year-old housewife, say they are happy to have bought an apartment in the “Francisco Hernando” development.

“For me its a question of quality of life,” she said as she made her way to a bakery, explaining she paid 180,000 euros (230,000 dollars) for her 90 square metre (970 square foot) apartment, half what it would cost in Madrid.

Belen moved into the apartment with her 14-year-old son and husband earlier this year.

She said her only complaint is that the neighbourhood lacks key public services, like a local doctor.

2008 Copyright AFP