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Homes Under Construction Outnumber Newly Finished Ones for First Time in Years

25 May 2015 – Cinco Días

Until February, 48.2% more homes have been built than last year. 

Stock is reduced by over a third, despite the crisis.

The rebound in the labor market and the return of credit have made demand for housing, which was rather stagnant during the worst years of the crisis, gradually come back to the sector. Consumers are expected to benefit from low housing prices in many areas. For the first time in 2014, property sales rosen and acquisition of stock of new dwellings picked up.

As a result of the surge in deals, construction sites have begun to pop up, especially where the surplus of new homes for sale during the years of crisis have been reduced. The proof of this, as usual, lies in statistics. In 2014, 34,873 houses were under construction, 1.7% or just slightly more than that of the previous year, but still far from the construction of 865,561 units that began in 2006, a historical high. Yet, last year ended with more finished homes – 46,795, a figure that has been in freefall since reaching its all-time-high, also back in 2006, with a total of 651,427 completed homes.

Studies, conducted by the Ministry of Public Works with data from surveyors colleges, show that in 2015 both indicators have begun to turn around. Thus, in the first two months of the year, the construction of 7,640 housing units has begun, representing a 48.2% increase over the same period last year and, for the first time since 2007, the figure is higher than the 6,637 homes also completed during January and February last year. The volume of final completion certificates is 26.7% lower than twelve months earlier. This portends that if both trends continue in the short  run – one clearly upward and the other one in the opposite direction – then 2015 will be the first year, after the crisis, to end with a higher number of housing units being built rather than completed.  All this points to economic recovery.

Uneven Distribution

Industry experts, developers, banks, real estate companies, cooperatives and the public administration are all convinced that recovery is on the way, as all factors influencing the market (employment, financing and low prices) seem to be converging in such a way. This revival of new housing development will be very uneven, however.

In areas where sales of primary residences have increased the most, such as Madrid, Barcelona and their metropolitan areas, the highest number of new projects are also being launched. The Mediterranean coast is another area where more deals are being closed and recorded, but that is certainly due to demand from foreign buyers. The need to start building again is not so obvious there, as the property stock is still abundant. “Construction will start again this year only in very select locations along the coast, where there is a lack of properties that are in high demand,” explained experts from a consulting firm.

Stock Goes Down by Over a Third, Despite the Crisis

Recently, the general director of the Research Department at the Bank of Spain, José Luis Malo de Molina, stated that in Spain, unfortunately, it was still not possible to know the number of newly built homes that remain unsold or unrented.

He was absolutely right, since no official data is collected on the  matter. There are only ballpark figures estimated by the Ministry of Public Works with a considerable delay: the latest report posted on its website  estimates the number until December 2013. However, the Spanish Confederation of Associations of Manufacturers of Construction Products (CEPCO) conducts a fairly exhaustive quarterly study; while “it does not aim to specify the exact number of housing units in stock, it does give an approximation and, above all, it analyzes the trend over the period.” The study, which has now covered the end of 2014, estimated that the surplus stood at 439,617 houses, 36.5% less than back in 2010, when it peaked at 692,560 homes. This means that despite the crisis, more than a third of the surplus has been absorbed, a factor that all experts consider to be a priority for the market in restoring balance between supply and demand, which was lost during the boom and subsequent burst of the housing bubble. For every 100,000 inhabitants, the stock has gone down from 1,496 homes in 2010, a record high, to 949 in 2014.

Original story: Cinco Días (by R. Guijarro)

Translation: James Leahu