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Asprima: Buildable Land is Running Out in Madrid

25 November 2017 – ABC

Land is running out and the market is becoming distorted in the Spanish capital. For two years, the price of buildable land for the construction of new homes in the Community of Madrid has been rising, especially in the centre. There is not much buildable land left and the space that is available has seen its value rise due to the increase in demand. This equation means that, unless new variables are introduced, we will end up seeing an acceleration in house prices. “Real estate activity has returned with a vengeance and new housing is needed”, according to Daniel Cuervo, the Director General of the Association of Property Developers in Madrid (Asprima) (…). By way of example, “in Valdebebas, two years ago, people were paying €800 per square metre for buildable land “and now that price is above €1,500/m2 (…)”.

He also thinks that the property developers feel very certain about the sale of their homes “and that there is competition between them”, which translates into high house prices. Certain political decisions have paralysed several developments (…).

The Councillor for the Environment and Town Planning at the Community of Madrid, Pedro Rollán, was quite explicit this week when he said that “talking about housing requires us to talk about land” (…). “Many people have been obliged to go outside of Madrid due to the (high) price of land (in the centre),” he said, at a conference organised by the Association of Housing Managers (AGV). At the same time, he called for “a policy that allows for the development of sufficient land to deal with the true demand in the city of Madrid”. Rollán made reference to the importance of the “large batch of land in the south-east of Madrid”, where “at least 50% of the homes will be subsidised properties”.

Value of land

Daniel Cuervo also said that the project underway in Los Berrocales, Los Ahijones, Los Cerros and Valdecarros (the Strategy for the Southeast, within the municipality of Madrid) will allow “the relaxation of new house prices, given that more than 100,000 homes are planned”. To this end, the Town Hall needs to “continue complying with urban planning legislation to convert plots into buildable land”.

The Director General of Asprima also (…) made reference to a study conducted by IESE, which indicates the need for 13,000 new homes per year in the municipality of Madrid “and the impossibility of achieving that”.

According to the experts, the price of land, with respect to the price of a home, should not exceed 20-25% of the total value; and the traditional unwritten rules indicate that it should represent one third. “In the neighbourhood of Salamanca, in certain cases, the price paid for land may reach 70%-75% of the final value of the home”, explains Óscar Ochoa, Director of the New Build department at the real estate firm Gilmar (…).

Areas on the rise

If we talk about other parts of Madrid, things change. In San Sebastián de los Reyes, for example, the value of land “represents around 30%-35%”. Ochoa warns that it is not only in the centre that it is impossible to find new land, the supply is also scarce along some of the main access roads. “Such is the case in Las Tablas, San Sebastián de los Reyes, Montecarmelo and Valdebebas along the A-1 and in Pozuelo and Las Rosas along the A-6”.

For Ochoa, the solution involves establishing urban development plans designed to meet the true demand for the areas (…). Ochoa acknowledges that in terms of buildable land “we are in the hands of the politicians”. That is why he asks “for the plots to be organised and for the concession and licence processes to be streamlined”.

According to the Community of Madrid, there is a need for between 15,000 and 20,000 homes per year, including the repositioning of homes for those who want to change the kind of property they live in and new homes that are built. (…).

The situation is also affecting the rental market, according to José María García Gómez, Director General of Housing and Rehabilitation for the Community of Madrid (…). “The rental market is under pressure and prices are rising there once again”.

García Gómez believes that the role of the Administration “is not to put obstacles in the way, but rather to grant licences. He believes that the new Land Act, which is being drafted, will bring stability, pointing out that of the 178 municipalities in the region, only 20 have a general housing plan in place. The conclusion is clear: much remains to be done” (…).

Original story: ABC (by Belén Rodrigo)

Translation: Carmel Drake