Cowboy developers unlikely to return, but estate agents are another story

Cowboy developers and their dubious housing projects were a big problem in Spain's boom years
Cowboy developers and their dubious housing projects were a big problem in Spain’s boom years

Adapted translation of a recent article published by the Spanish daily El Mundo

A ripple of alarm has started to run through the property sector with the arrival of cowboy operations in the estate agency business. The appearance of these companies with an opportunist outlook keen to ride the crest of the wave is worrying some of the most established names in the sector. They’re concerned that it could have a negative effect on the recently renewed image of the sector, which has cost so much to rebuild in an industry that is permanently under the spotlight.

You only need to look back a decade or so when it was fashionable to be a developer or estate agent with no experience to understand the concern among the companies with more experience. This includes those who have sat out with the crisis and the new arrivals who have helped to relaunch the market (for example Aedas Homes). The risk of the arrival of newbie companies pursuing easy money is one of challenges to be met in the new property market cycle.

It was precisely the ‘chiringuitos’ (beach bars) – the term used at the time (a decade ago) to describe the amateurs in the property sector – who helped inflate the bubble and damage the industry’s reputation through malpractice. New entrants in property development were helped along by easy bank loans for dubious housing schemes. “The economic context allowed people with no training or experience in the sector to become part of it with the sole objective of making easy money on an all or nothing basis,” says Daniel Cuervo, general secretary of the Spanish Property Developer and Constructor Association (APCE). These pseudo-professional operations were the first to disappear during the property crisis.

Banks nowadays are more cautious and don’t give loans to just anyone. This means the development sector is more protected from opportunists, according to Cuervo. “The loan market requires a significant injection of capital such as having the land paid for as well as the project and licence costs. You also need to show a track record of ability, know-how and professionalism,” said Cuervo who believes that “it would be very difficult for non-professionals to gain the high profile they had in the past”.

“We aren’t aware of this phenomenon at the moment,” said Cuervo, “but we’re not ruling out the occasional incident.” He believes that the sector itself ensures there aren’t many of these agents since it badly affects the serious and responsible companies.

“Suppliers and partners who nurture non-professionals will tar themselves with the same brush and find it difficult to work with professional companies,” he added.

His words are, for the time being, backed up by the facts. According to the national business registry compiled by the Spanish Institute of Statistics (INE), in 2017 there were 67,812 companies involved in selling property, the lowest figure since the registry started in 2008 with 106,375 on its books. Since then, the number has not stopped falling.

But if the property development business is protected from cowboy operations by financing considerations, the estate agency business is not. Anyone can set up as an estate agent in Spain, and the barriers to entry are low, which helps explain why the number of companies in the sector has risen from 149,000 in 2015 to 169,000 today, according to figures from the INE. Industry insiders fear that many of the new entrants are lack professionalism and are chasing easy money, and could end up damaging the industry’s reputation, just like they did in the past.

“It seems that the real estate agency business has no restrictions and anyone can work in it,” one unhappy client says. “In my case I got the impression that they just want to close sales any way they can and collect their commission, without taking care of the client.”

Some industry insiders are calling on the Spanish Government to regulate the business and make it difficult for cowboy operations to take advantage of the recovery and damage the industry’s reputation again.

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