RR de Acuna & Asociados expects home prices in Madrid, Barcelona and other major Spanish cities to fall a further 30pc in a relentless slide until 2018, but it may be even worse in sunbelt regions where thousands of Irish people either live or own homes.
Fresh losses could reach 50pc and drag on for 10 to 15 years in those places where construction ran wild during the bubble, bringing the total decline from peak to trough towards 75pc.
"The market is broken," said Fernando Rodriguez de Acuna, the group's vice-president. "We calculate that there are almost two million properties waiting to be sold. We have made no progress at all over the past five years in clearing the stock," he said.
"There are 800,000 used homes on the market. Developers are sitting on a further 700,000 completed units. Another 300,000 have been foreclosed and 150,000 are in foreclosure proceedings, and there are another 250,000 still under construction. It's crazy."
The overhang is vast for a country with 48 million inhabitants and annual demand near 200,000. It is coupled with an outflow of workers and the start of an aging population crisis.
The government says the housing market has already "touched bottom" after falling 30pc since 2008, even though premier Mariano Rajoy admits that there will be no economic recovery until 2014.
As a member of the eurozone, Spain no longer has the monetary levers to engineer a soft landing for "nominal" house prices. This makes it much harder to break the vicious cycle of debt-deflation.
The property sector and the banks are each dragging the other down. The share price of nationalised Bankia fell 14pc after the authorities said the lender was worthless, with "negative value" of -€4.2bn.
Bankia will need a further €13.5bn of taxpayer funds, taking the total to €18bn. Some 350,000 small investors – many talked into buying Bankia's preferred shares as a form of saving – have lost their money.
Banco de Valencia shares fell to 9 cent after state rescue fund said it would seize 99.9pc of the company before selling it on to CaixaBank, a total wipeout for shareholders.
There has been scant improvement since 2009, when the deficit peaked at 11.2pc. The IMF says the deficit is still stuck at 7pc even if bank costs are stripped out.
It warns against austerity overkill, arguing that too much fiscal tightening can be self-defeating in a regional slump without offsetting monetary stimulus. New research by the fund suggests that Spain's "fiscal multiplier" may be three times higher than originally assumed.
Mr Rodriguez de Acuna said Spain's property crisis varied enormously by region, with the worst damage on the Club Med belt. Even so, recent firesales in the inland city of Toledo have shocked analysts.
Santander recently slashed prices by 60pc to clear a backlog of properties. When Banco Sabadel followed, it had to offer haircuts of 70pc. Another large bank suspended its Toledo sales two weeks ago after prices went into meltdown.
"We think prices will recover in the traditional coastal areas like the Canaries or Malaga within five to eight years, but for now banks are offering huge discounts and nobody is calling. Marbella has already fallen by 50pc and prices are going down and down," Mr Rodriguez de Acuna said.
"In places like Castellon [near Valencia] where over-development was mad, banks are not financing anything and there is a high probability that these properties will never be sold," he said.
Spain's bank rescue from the EU bailout fund (ESM) is bringing the crisis to a head, quickly and brutally. Brussels insists that Madrid crystallise the losses in the portfolios of the rescued banks, ending the "extend and pretend" policy that has concealed the full gravity of the crisis until now.
The big trio of healthy banks – Santander, BBVA, and Caixa – have all rushed to sell their backlog before the state's "bad bank" unloads its holdings. They have already written down 95pc of the value of their land portfolio. "There is little more to lose," said Mr Rodriguez de Acuna. (© Daily Telegraph, London)