Planning approvals fall by 59% but construction completions keep rising

The number of planning approvals in Spain fell by 59% to 199,146 in the first 8 months of the year, according to new figures from Spain’s Ministry of Development. This means that housing starts this year will drop to a level not seen in Spain for close to a decade.

Looking just at August, planning approvals slumped even further, by 67% compared to August 2007, and by a staggering 80% compared to August 2006.

The good news is that the dramatic reduction in planning approvals will reduce the pipeline of new properties coming onto an already saturated market, though unfortunately it will take between one and two years for the impact to be felt. That said, housing starts in Spain are still high compared to other European countries. In the UK, for example, there are around 120,000 housing starts per year.

The bad news is that falling planning approvals will drive up construction-sector unemployment even further, reducing demand for new homes.

And whilst planning approvals have collapsed, the number of new homes finished has carried on rising, though at a lower rate than before. According to the Ministry of Development there were 399,381 construction completions in the first seven months of the year, compared to 398,244 in the same period last year – a rise of 0.3%.

At present there are 650,000 unsold homes on the market, and the figure is expected to reach 1 million by the end of the year, say developers. Beatriz Corredor – Spain’s Housing Minister – estimates that it will take up to 2 years for the market to absorb the excess supply, but rules out any government intervention to reduce the glut by buying up properties.


SPI Member Comments

Thoughts on “Planning approvals fall by 59% but construction completions keep rising

  • The idea that the supply overhang will take two years to absorb is totally ridiculous.

    The eventual size of the excess inventory will be closer to 2m rather than 1m. More properties are still being built than are being sold so the over supply conditions are getting worse, not better. At the current rate of sales (circa 250,000) the overhang will take 8 years to clear not 2.

    I am just a casual observer, with a six line spreadsheet of starts, completions and sales. I am not an expert but even I can work this out. How come Ms Corredor’s worthless propoganda gets repeated endlessly ?

  • Spanish Property News says:

    Sebastian, I agree with you, it’s going to take a lot longer than the government says for the market to digest the housing glut. Some ‘experts’ predict as long as 15 years in some places, though I think it more likely that those areas will turn into urban wastelands before the housing stock gets sold. But one has to report the news, and that’s what the lady says. I’ll publish another piece on this subject shortly which gives the alternative view.

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