2010 was a disaster for the residential construction business in Spain, but I think we are seeing the beginning of the end.
There were just 83,800 planning approvals in eleven months to the end of November last year, down 18pc compared to the same period the year before, according to the latest figures from the Government (Fomento).
Compared to 2006, at the peak of Spain’s building boom, planning approvals are down 90pc. To all intents and purposes, a total collapse.
It looks like Spain is going to close the year with less than 100,000 planning approvals, something that has not happened for many decades.
The only good news is that, compared to October, planning approvals were up by 33pc.
The Beginning of the End
Sticking my neck out a bit, I forecast that 2010 will mark the bottom of this cycle for Spain’s residential construction industry. New home construction will start growing again in 2011, albeit weakly and from an exceptionally low base.
I also expect to start seeing a shortage of new homes that people want at the same time as a glut of new homes nobody wants, because many of the homes built during the boom were poorly conceived (that’s what happens during an insane boom). That means opportunities for smart developers who know what they are doing.
Developers buying land and building now will enjoy a big price advantage. That also applies to people building their own homes.