Spanish land prices keep falling, making it an interesting time to be one of the few builders with cash in Spain

Building land zoned for urban development fell 19.8pc to 182.5 Euros/m2 according to the latest figures from the Government (Fomento). Average building land prices are now down 36pc from the peak in 2006 according to official figures, but probably far more in reality.

Land prices did not fall all over Spain, however. They rose 34pc in Navarre, 2.9pc in The Balearics, and 2.7pc in the Canaries, all according to official figures.

Official figures are suspected of understating the true extent of land price falls. On the coast, where most holiday-homes are located, land prices are probably down between 50pc and 80pc, or more (my estimate), though not in a coastal city like Barcelona, where land is scarce.

Cash is King

Lower land prices spell opportunities for Spanish builders with cash, who can now get prime plots of land with steep discounts and build better, cheaper, more attractive homes than most of the units built in the boom now languishing on the market.

According to Miguel Córdoba (pictured above), professor of finance at CEU San Pablo University in Madrid, lower land prices mean you can now build homes around Madrid for €100,000 less than before.

Land is almost worthless in many parts of Spain, meaning “we can now build a third cheaper than what it cost just five years ago,” he recently told the Spanish daily El Mundo.

For example, in the suburbs of Madrid (between the M-30 and M-40), a 90m2 flat that would have sold for €400,000 in the boom is now on the market (but not selling) for €280,000. A developer building in that area today has to pay just €600/m2 for land, which means they can offer the same sized flats brand new for just €170,000, undercutting the market by €110,000 or 40pc and still make a profit of 100%.

“If anything is a profitable business these days it is buying urbanisable land and building homes,” said Córdoba.

Five years ago investors were throwing money at anything to do with Spanish real estate just before the crash. Now, when prices have crashed, there are only a few genuinely canny investors out and about, picking up the bargains. It’s often the way.