The empty pipeline of new homes is to blame for the crash in new home sales, claims the Spanish Association of Builders and Developers (APCE in Spanish). And banks refusing to finance developers are to blame for the lack of new projects.
The number of new homes sales recorded in the Property Registry for March was down 42 per cent over 12 months, according to the latest Spanish property market figures from the National Institute of Statistics (INE). New home sales have been in freefall for the last year or more.
“It’s highly likely that there are fewer sales because there are fewer developments being started,” said Carolina Roca (pictured), a representative of the APCE executive committee, and vice-president of the Madrid developers’ association Asprima, in comments to the Spanish press.
Roca says that during 2014, construction began on less than 35,000 properties in Spain, arguing that “we’ve had the brakes on for too long” during the long slump in residential development.
Pointing out that resale transactions are rising fast (up 32 per cent in March according to the INE’s figures) Roca argues the real reason why new home sales are collapsing is because developers can’t get financing to start new projects. “If new builds aren’t started but resale properties are being sold it’s because developments have financing difficulties,” she said.
Developers report that, although banks are now starting to lend mortgages to homebuyers again, they still won’t lend development mortgages to promoters trying to get a new scheme off the ground.
Thanks to the lack of financing available, Roca is gloomy about the prospects for developers in the near term. Banks still have too much exposure to development loans left over from the boom, she says.
That means the supply of new developments for sale in Spain will remain constrained for some time to come, creating an interesting opportunity for the few developers that do have access to capital.
Commenting on recent data suggesting that Spanish house prices have started to recover, Roca said it was a good sign, but lamented that it market driven by resale transactions “doesn’t create economic activity or generate employment”.