Residential planning approvals (excluding social housing) plunged 70% to 19,844 in the second quarter of the year compared to the same time last year, according to the latest figures from Spain’s College of Architects.
Over 12 months to the end of June, planning approvals are down 70% to 108,120 compared to the previous 12 month period.
Planning approvals are the pipeline for the residential building industry, so these figures are a disaster for the sector, not to mention the Spanish economy. As builders finish the projects they are still working on, many of them started at the tail end of the boom, not a few of them will find they have nothing to do.
On the other hand, it also means that one day, when the glut of properties has finally been cleared, there will suddenly be a shortage of new homes on the market. But that is still a few years away yet.
Check out this stat: Last quarter planning approvals fell by an annualised 90% in Murcia, home to countless new golf developments, many of them undistinguishable from each other. Over 12 months planning approvals are down 82%, better, but still a disaster for the local building industry, and therefore for Murcia.
Murcia is an interesting case. In the boom, developers swarmed in with one plan between them – to build golf developments for foreigners. Considering the amount of capital employed in building golf developments you would have thought they might ask themselves if it was such a good idea to all do the same thing at the same time – not a bit risky perhaps?. Of course banks were falling over themselves to finance all these projects, so who’s really to blame?
Now banks have turned off the tap, which helps to explain why planning approvals have collapsed. “2009 has been the year of refinancing for developers, but banks are not offering funding to start new developments, just to finish those already being built,” Gonzalo Bernardos, a housing market expert at the University of Barcelona, told the Spanish press.
But even if they could get the financing, developers are far from eager to start building again until Spain’s glut of around 1 million new homes has been dealt with.
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