27 December 2016 – El Confidencial
The International Monetary Fund (IMF) issued a warning a few weeks ago: the greatest danger in terms of a new real estate bubble on the world scale is the lack of homes. Although it seems impossible, Spain, with its housing stock of 25 million – for a population of 47 million – of which approximately one and a half million are empty, needs more homes. In fact, it needs around 150,000 new homes per year in order to have a healthy residential market. Otherwise, there will end up being strong upwards pressure on prices (of both new builds and second-hand properties), which could lead to a new and much-feared bubble.
At least that is according to the majority of the experts in the real estate sector. From appraisal companies, to consultancies, to property developers, to cooperative managers. Everyone agrees that Spain needs more homes. But, how is that possible when the country has a surplus stock amounting to almost half a million units?
“The surplus stock, or rather, the census of unsold homes is not always in the locations in which there is demand. Homes are not bricks that can be moved from one place to another”, said Juan Fernández Aceytuno, Director General at Sociedad de Tasación. “Moreover, in some places in Spain, the stock is very low and new homes need to be built to satisfy demand”, added Julián Cabanillas, CEO at Servihabitat.
But isn’t the second-hand market sufficient to satisfy demand? “When making a major investment such as buying a home, families prefer to acquire a new build than a second-hand property” (…), said Ernesto Tarazona, Partner and Director of Residential and Land at Knight Frank.
The problem, according to the real estate experts, is that hardly any new homes are being built. Since the burst of the real estate bubble in 2007, house construction has been completely paralysed. Spain went from building 800,000 homes per year to just 35,000 homes in 2013 and 2014 (according to housing permit data from the Ministry of Development) and for the market to be healthy again, we should be building around 150,000 units per year.
“House prices and sales are definitely showing signs of improvement, but we cannot talk about the stabilisation of the sector until we see a recovery in terms of construction”, said Carolina Roca, Vice-President of the Property Developers Association in Madrid (Asprima). (…).
And that is not an easy task, according to Roca. “In order to reach that figure (of 150,000 new homes per year), we not only need land, but we also need to restore the productive and entrepreneurial fabric of the sector, given that the majority of the players in the property development and real estate sectors have disappeared. Very few property developers are actually building homes at the moment, and those that are, are doing so using own funds for the most part, given that although financing to individuals has recovered, it has not for property developers to the same extent. Not even with the entry of new players such as investment funds will we reach those figures”, laments Roca.
“The construction of 150,000 homes per year seems like a reasonable figure. Nowadays, around 500,000 homes are sold per year, of which, only 10% are new builds. During the boom years, new builds accounted for 50% of all house sales and it is likely that the percentage will end up stabilising at around 30%, which means that 150,000 homes per year seems reasonable”, acknowledged Juan Velayos, CEO at Neinor Homes, one of the new players in the sector. (…).
“Nowadays, everything that is built is sold. Off-plan homes are sold out in a matter of weeks”, said Ernesto Tarazona who, nevertheless, recognises that a very important segment of potential buyers is being left out of this timid recovery. “Nowadays, anyone wanting to buy a home for €160,000 in Madrid is going to be disappointed; they just can’t. There isn’t any land available to build houses at those prices”, comments Juan José Perucho, Managing Partner at the Ibosa Group. (…).
Original story: El Confidencial (by Elena Sanz)
Translation: Carmel Drake