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Valencia’s New Home Stock Has Fallen By 35% Since 2009

5 December 2016 – Levante EMV

According to a report by the Spanish Confederation of Construction Product Manufacturer Associations, the stock of new homes has decreased by 35% in the Community of Valencia since the collapse of the construction sector in 2009. The market has digested 26,926 properties in Valencia’s three provinces, leaving 92,782 unsold. The sales figures are very uneven, but the sector is now recovering on the Costa Blanca and in Alicante capital and the city of Valencia. In Valencia capital, there are just three hundred new unsold homes left, with some analysts estimating that as few as one hundred homes have yet to be sold; and the first developments to be promoted by Sareb, investment funds, financial institutions, cooperatives and overseas funds have already started.

The situation for Valencia’s construction companies is still complicated, to the extent that the President of the Association of Valencian Property Developers (APCV), José Luis Miguel, acknowledged yesterday that “anyone who owns land should hold onto it. A good decision would be to do nothing”, said José Luis Miguel, as he presented a study about the situation in the sector.

The property developers have commissioned a study to obtain a detailed understanding of how the sector is performing following the crisis, at a time when the “rules of the game have changed to allow the entry of new competitors, such as investment funds and financial institutions”. The author of the study pointed out that the sector is still at “historical lows”, despite the first signs of recovery being seen along the coast in Alicante and Valencia capital. “We are at the beginning of the (upwards) curve, but it is clear that the recovery is now being felt in certain areas”.

José Manuel Luis added that the volume of sales in the second-hand market are similar to those recorded in 2006 and 2007, but at that time they accounted for just 38% of all transactions, whereas now they account for 88%, compared with 12% involving new homes.

Weakness in demand

The head of the study underlined that the sector still perceives a weakness in terms of demand due to the difficulties involved in obtaining financing and because the banks are requesting deposits of 20% before they are prepared to grant mortgages. In any case, the greatest problem is that 40% of Valencians admit that they are unable to afford extraordinary expenses of €650 per month, which means that they are not able to buy. The only option for these people is to rent.

Nevertheless, the property developers are reluctant to commit themselves to building homes for rent because that requires the freezing of assets for a long time and the repayment period for such operations is twenty-five years.

José Luis Miguel lamented the situation in the sector and the disappearance of 90% of the property developers that existed before the crisis. “Many property developers were small and the crisis did away with them. The association used to have four hundred members and there are now only forty left”, he said.

Original story: Levante EMV

Translation: Carmel Drake