The Spanish home building industry is forecast to grow this year for the first time since the crisis struck, offering a glimmer of hope to a sector that went from number one in Europe to almost non-existent in the space of seven years.
After contracting 6.5 per cent in 2014, Spanish residential construction output will grow by 5 per cent this year, 9 per cent next year, and 11 per cent in 2017, according to forecasts by Euroconstruct, a network of 19 European research institutes. If correct, that means 2015 will be a pivotal year for the Spanish home building industry.
Despite offering the brightest forecast in years, Euroconstruct warn that the benefits of rising activity in the construction sector will take time to filter through to consumers, and that improvements are still highly localised, not benefiting the whole country in equal measure.
That means a two-speed recovery for the Spanish property market. “In the short term, the country will have both areas where conditions are right for development and others where the crisis will continue,” explains Euroconstruct’s latest report, published in Spain by the Institute for Construction Technology (ITEC in Spanish).
Despite forecasting growth, Euroconstruct have doubts about the strength of the recovery. “If development only takes place where and when there’s proven demand, it’s difficult to imagine a scenario with substantial growth.” Which is why the report cautions that its predictions for 2016 (+9 per cent) and 2017 (+11 per cent) “are only robust on the surface”.
Weak consumer demand and oversupply will continue to weigh down on the market, and the Spanish construction sector will continue to build at levels way below the European average, “a sign that its problems still remain”. They also point out that more private investment is needed.
The recovery in residential property transactions last year was not as good as it seemed, argue Euroconstruct, since large funds were responsible for many of the purchases, implying continued weakness of private demand. “The price adjustment has prolonged the good times for the wholesale property market. However, improvement is taking a long time to reach retail purchases and even longer to reach the actual construction market.”