MADRID - Spain had 614,000 new homes sitting unsold at the end of 2008 -- lower than most analysts' estimates -- according to the first major survey of Europe's most over-stocked home market.

Almost half of those are clustered on the over-developed coast according to the housing ministry study, which surveyed or visited 6,810 real estate companies -- around 70 percent of a sector that is shrinking fast in the face of one of Europe's most savage property downturns.

The survey is the first attempt by any public or private body to pin down the size of Spain's unsold stock -- estimated at over 1 million homes by some economists -- using a methodology similar to the respected Royal Institution of Chartered Surveyors (RICS) study of the UK market.

The survey looks good to me, very representative and well designed, said Jose Carlos Diez, an economist with Intermoney in Madrid. However, he added the figure was still represented a serious challenge despite being below many estimates.

You should not lose perspective, the figure is less than expected, but 600,000 homes is still a lot of homes. At the current rate of sale, the stock will take around three years to be run down while Spain's housing market -- the former motor of economic growth -- suffers a hangover after a 10 year boom. In that time prices tripled and huge tracts of the coast in particular were disfigured by rows of uniform apartment blocs.

In 2007 alone Spain built 690,000 new homes -- as many as France, Britain and Germany combined -- even though underlying demand is normally less than half that. Now hundreds of builders are going bust every quarter amid a 34 percent dive in sales in the year to date and their assets clog up banks' asset sheets.

The survey published on Friday also notes that Spain had 627,000 homes in the process of construction at the end of 2008 -- 70 percent of them almost finished and 39 percent already sold.

PACO PACKS IT IN

The study comes after news one of Spain's best-known building tycoons has abandoned what would have been Spain's biggest development built by a single firm -- a maze of tower blocks containing 13,500 flats outside the small village of Sesena on the red-dirt plains of central Spain.

Spanish press reported that Francisco Hernandez, known by his nickname 'Paco the well-digger', walked away from the project after building 5,600 of the flats but not road, power or water connections which the local council estimates will cost 18 million euros.

Newspapers quote Hernandez, who is as much known for his opulent lifestyle as the massive development south of Madrid, saying the local council would not give him the necessary licences to finish the project which is sandwiched between two motorways on the site of a former olive grove.

Neither Hernandez nor the mayor of Sesena were reachable for comment on Friday.

(Reporting by Ben Harding; Editing by Toby Chopra)

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