Recent press reports reveal that Spain's 8 biggest, listed developers have seen their balance sheets shrink by 40% over the course of the Spanish property market crash, thanks to tumbling asset values and disinvestments to pay down debts. It's always worth keeping an eye on the listed developers: They have to declare their results, which shed some light on what's happening in the market. Between them and their bank creditors, they are also giving us a good example of how not to solve a problem.

Right now, the only game in town for Spanish developers is managing debt levels. In total, Spain's developers have a combined debt of 323 billion euros, or about 30% of Spanish GDP, according to the Bank of Spain. Around 9% of that, some 29 billion Euros, is owed by the biggest 8 listed developers, including companies like Martinsa-Fadesa that are already in court administration, unable to meet their debt payments. All these developers are essentially now in the business of flogging assets and renegotiating debts, not building homes. Makes you wonder if they should still be referred to as developers, if they don't actually develop anything.

Unfortunately, negotiations between the banks and developers seem to have focused more on kicking the can down the road then solving the real problem - the over-valuation of asset prices. The pattern is familiar: They reach an agreement for debt repayments but months later it unravels and they have to start over. One has to assume that even they know they are wasting time. It's obvious to everyone else.

And the longer they put off effective solutions, the longer the Spanish economy will suffer. Billions of euros are tied up in unproductive loans instead of financing productive business and creating jobs. Officially the bad-debt ratio of developers is 10% (32.5 billion euros), but I suspect it is much, much higher than that.

At some point banks and developers alike are going to have to grab the bull by the horns and deal with their over-valued property portfolios. When that happens you will see widespread price declines for certain types of Spanish property. That means there will be some great opportunities for investors in a position to exploit the market. When will this happen? As always, difficult to say, but it's only a question of when, not if. In my opinion, the sale will begin in the second half of the year or early next year. But first of all, the key players have to learn how to solve a problem.