This is a website for buyers, owners, and sellers of property in Spain, offering reliable information and resources to help you get things done with confidence. It is run by Mark Stücklin, author of the Spanish Property Doctor Column in The Sunday Times (2005-2008), and the book ‘Need to Know: Buying Property in Spain’ published by Collins.
New residential construction in Spain has all but disappeared, guaranteeing their will be a shortage of the new homes that people want in years to come.
There were just 3,106 planning approvals for new residential homes in November, down 32pc on last year (43pc year to date), and 95pc compared to 2006, according to the latest figures from the Government.
With only December’s figures to come, it is safe to forecast that there will be less than 50,000 planning approvals in 2012, compared to 78,000 in 2011, and 866,000 in 2006.
There are several reasons for the collapse in planning approvals, including a glut of new homes already on the market, and weak demand due to the economic crisis. But the main reason is the lack of financing available to developers, the few that still exist.
There are already signs of a shortage of the type of new homes that people actually want, which will get worse in the next few years, thanks to long lead times in the home-building business. It typically takes 36 months or more from drawing board to delivery.
Building marketable new homes is once again a good business for the few developers with access to cash who know what they are doing.
Neil says:
Until a lot of the rubbish built in the past 10 years is demolished, the glut of homes no-one wants will remain, and investors will continue to believe there is no need to invest. I hope lesson learned for spanish developers and planners. Will be interesting to know more about the 50,000 approvals in 2012 : where, what type of building, etc.
Steve A says:
The argument that is is mainly down to a shortage of finance is surely false. This is simply a supply and demand issue. The current supply of property for sale far exceeds market demand – a situation which will continue to push down prices until the point of equilibrium is reached. Only when market prices enable demand to match or exceed supply will it become economic to start building new properties again. Prices still have some way to fall from peak; in Eire they have fallen 55% to stablise. Spain needs to achieve a similar fall before it hits bottom – another 12 months I think – and then ten years of price stagnation. for new building demand to recover. Meanwhile current average asking prices still remain ludicrously far above average sale prices.
Mark Stucklin says:
Steve, I agree with most of what you say, but not your “shortage of finance is false” statement. Most home building is always done with financing. No financing, no building. Most buying is always done with financing. No financing, no buying.