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Covid-19 will increase the cost of new homes and renovations

new home building and renovation costs to rise in spain
Covid-19 will increase the cost of new homes and renovation projects in Spain.

New sanitary regulations, and social distancing in the workplace, coupled with less responsive planning departments, will drive up the cost of building work, warn industry experts.

The Royal Decree of the 9th of June introducing “urgent measures” to deal with the threat of infection from Covid-19 in the workplace are in force until “the end of the health crisis situation brought about by Covid-19.” Nobody knows how long that will take, but not before 2021, or even 2022, is a good guess.

European workplaces are already highly regulated, but the Spanish government has brought in a slew of new sanitary measures intended to stop contagion at work, such as wearing masks and disinfecting hands and surfaces, wearing PPE, enforcing rotas and social distancing of 1.5m, which will also apply to building sites.

Builders will also be responsible for looking out for Covid-19 like symptoms in their work gangs, taking temperatures if necessary, and reporting possible cases to the health authorities.

Obviously, these measures will come at a cost, especially a labour cost, which industry experts cited in the Spanish press say will increase labour costs by between 7% and 14%.

Wages are a big part of new home costs, and an even bigger part of renovation costs, so the higher wage bill is estimated to have a knock on impact on overall costs of between 2.5% on new developments, and up to 7% on renovation projects.

Planning costs also on the rise

The national, regional, and local authorities could compensate by reducing some taxes and planning costs, or even simply by speeding up the planning process, and acting efficiently, but there is no sign of that.

Quite the opposite, in fact. With the notable exception of the health service, the Spanish administration at all levels has become extremely unresponsive in the Covid-19 crisis, and planning procedures are taking longer than ever.

Even before the coronavirus pandemic, slow-moving planning departments and unproductive regulations were a blight on the housing market, and a huge cost to society.

A recent study found that Spanish planning departments cause delays of 12 months on average, and increase the cost of new homes by €13,000 (and as much as €39,000 in the upmarket municipality of Majadahonda, in Madrid). Thanks to Covid-19, planning costs will rise as it takes  longer to get building permission out of planning departments that have become even more unresponsive.

It could take months or years for planning departments to return to their former level of productivity, which was already dire, and the new sanitary regulations on building sites could also be in place for months or years. That means higher costs for new homes and renovations for now.

All these costs will be passed onto the customer.

Of course, there is also the chance that a downturn in the building industry drives down wage bills and material costs enough to compensate for the higher costs of planning and regulations. In this case brickies and building material suppliers will pay the price. So the net impact of Covid-19 on new home buyers and renovation clients might turn out to be neutral. 

SPI Member Comments

One thought on “Covid-19 will increase the cost of new homes and renovations

  • They may want to raise prices as much as they like. In conditions of falling demand, this will end anyway with market overstocking and lowering prices. The bottom of the prices will come in about 2-3 years

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