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Planning approvals show no sign of recovery

Monthly planning approvals for new homes are close to record lows, and might create a shortage in the next 5 years.

There were just 4,600 planning approvals for new homes in February, down 44pc on the same month last year, according to the latest figures from the Government (Fomento).

Compared to February 2006, when Spain’s building boom was in full swing, planning approvals are down 93pc. That just shows you how badly the Spanish house-building industry has been hit by the bust, as illustrated by the chart above. From being the driver of Spain’s economy it has collapsed to almost nothing, which helps explain why unemployment is close to 25pc and heading for 30pc.

As a result of the collapse in planning approvals, I believe there will be a shortage of newly-built homes in the next 3 to 5 years. This despite the fact that there is a glut of something like 750,000 newly-built homes on the market today.

The problem is that many of those homes are typical of what gets built at the peak of a boom: badly-built in a hurry, in undesirable locations, with scant regard to what house-hunters actually want. There is demand for new homes, just not those new homes.

As a rule of thumb, you should try to buy off-plan in the depths of the bust, not at the peak of the boom. In reality, though, most people do the opposite.

I forecast there will soon be a shortage, if there isn’t one already, of the kind of new homes that people actually want: better designed, better built, more generously-sized, more energy efficient, better located, and significantly cheaper. And that is what developers building today can offer.

The problem is, there are hardly any developers left standing, as you can see from February’s planning approvals.


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One thought on “Planning approvals show no sign of recovery

  • Anne Easton says:

    Totally agree with your comments after looking to buy a suitable property for the last 3years with all of the land u have in Spain the quality location and design are never suitable. Suggest they look in Florida and see the difference. The only apartments we like in the Marbella area were half a mile off the n340 with nothing around except unfinished paths and derilict building plots.

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