Here are some of the “burning issues” facing the Spanish property market, according to a new report by PwC, a global professional services company.
There is no reliable market data, and the lack of transparency is putting off investors, say PwC. They call for detailed study of the market to help rebuild investor confidence through greater transparency.
Homes people want
In future, Spanish developers will have to research and understand client needs, then build to meet them, as opposed to the ‘build it and it will sell’ attitude in the past.
New planning laws
PwC recommends simplifying planning procedures to make it easier to turn land into new homes, pointing out that it can take seven years to get land urbanised under present laws, as illustrated by the following graphic.
Alternative sources of financing
Banks turbo-charged the boom with easy money, but now they won’t even finance the best projects. Bank credit for land acquisitions will be almost unheard of in future. Developers will have to find other sources of financing, like cash-flow from rentals.
The following chart from PwC illustrates how bank credit to developers exploded between 2002 and 2008, and is now falling.
If developers can’t get financing, there won’t be any new building.
The number of developers exploded during the boom, but now the industry is shrinking and consolidating fast. 2,758 developers have gone to the wall since the bust began, with more to follow. There will be fewer developers in future, focusing on areas and niches, and selling to more demanding clients.
Banks and their repo divisions will dominate the housing market for the next few years. Financial reforms could encourage them to dump their stocks as quickly as possible, and drive down prices even further. Whatever happens, the banks will determine the future composition of the Spanish property market.
As you can see from the following chart, banks have repossessed almost €90 billion in residential property assets. (Suelo = land, promoción terminada = finished new homes, promoción en construcción = new homes under construction, hogares = repossessed homes, resto = other).