On the back of some unreliable price and transaction data suggesting that the worst is behind us there has been some talk lately in the Spanish press about the housing market finding its bottom. But the latest figures for planning approvals show that, for the residential construction sector at least, there is still plenty of bad news out there.
The depressing news for anyone who makes a living building homes in Spain is that in the year to August planning approvals were down 62% to 76,411 compared to the same period last year, and down 0.4% on a monthly basis.
But these figures don’t tell the whole story, now that the Spanish property sector’s slump has lasted longer than a year. The year-on-year decline in the same period last year was over 50%, so compared to 2 years ago, this year’s decline can only be described as a debacle.
It means that Spain’s residential building trade is shrivelling up. All the resources that used to be dedicated to building hundreds of thousands of homes each year are increasingly standing idle. In the boom years the real estate sector, including construction, accounted for close to 20% of Spanish GDP. By some estimates it has now shrunk to 10%, but that is still substantially above the OECD average and way too high for Spain.
It helps explain why unemployment in Spain is heading for 20%. Every point of GDP lost to the housing slump destroys 200,000 jobs. That in turn is bad news for the housing market, as people without jobs can little afford to buy a home or pay the mortgage.