Spain’s Top Cities Show Signs Of Housing Recovery

21 January 2015 – WSJ

Spain’s residential real-estate recovery is a tale of two cities: Madrid and Barcelona.

Barcelona is the only city in Spain to post an annual increase in home prices during 2014. Prices in the city rose 2.8%, with some neighborhoods gaining as much as 8%.

Madrid, too, has fared better than most. While it hasn’t enjoyed price gains, Madrid’s decline of 4.9% last year was better than the 5.7% drop for Spain overall, according to, a Spanish property website.

The price performance in Madrid and Barcelona helps explain why Spain’s construction sector is expected to make a comeback in 2015 after seven comatose years, as demand grows amid a modest economic recovery. Most of the building will take place in Spain’s two biggest cities.

“You have to look at Spain as if it were two countries,” says Fernando Rodríguez de Acuña of real-estate consulting firm R.R. de Acuña & Asociados in Madrid. “There’s the Spain that’s recovering. That’s the Spain that has the big cities and wealthy coastal areas. Then there’s the Spain where we went crazy during the housing boom, and that’s not going to recover for at least 10 years.”

New housing permits in greater Madrid were up 26.4% in the first 10 months of last year compared with the same period in 2013, according to the latest available data from Spain’s Ministry of Public Works. Most of the residential construction, investors say, is apartment buildings. Loans to build residential housing in Spain overall were up 25.6% in the third quarter of 2014 from a year earlier, according to Spain’s General Council of Notaries.

No one expects a surge in building comparable to the boom days. Nearly the same number of building permits in greater Madrid were issued in June 2006, at the height of the building frenzy, as in the first 10 months of 2014.

The construction comes as Spain tries to digest an estimated one million unsold empty houses, which can seem “counterintuitive,” says Fernando Encinar, head of research at, a Spanish property website. “In 2015, there will be a high level of housing stock at the national level, but a deficit of housing in certain markets that will allow for the construction of new homes.”

Even within Madrid and Barcelona, there are major differences. Home prices in an exclusive neighborhood of Madrid, Chamartín, fell 2.2% in 2014, while another neighborhood south of the center, Villaverde, saw declines of 14.6%, according to data from

Spaniards who didn’t lose their jobs during the country’s downturn and have been waiting for house prices to slow their decline are among the most likely buyers, analysts and investors say. Banks also have been more willing recently to issue home mortgages to buy the newly built houses.


Fernando Moliner Robredo, Chief Executive of Actívitas Inversión Inmobiliaria SL, the developer of a 105-unit apartment building in the Villaverde neighborhood of Madrid, says a postcrisis building lull created a need for housing. “In Madrid, new housing stock won’t cover demand for more than six or nine months,” he says.

Luis Martín Guirado and César Barrasa, executives at Sareb, Spain’s “bad bank,” say they also are seeing an uptick in demand for land beyond Madrid and Barcelona, including along the Mediterranean Coast and the Balearic Islands.

The expectations for construction growth in Spain break from the norm in other European cities hard hit by the financial crisis. Residential property development in Europe has generally remained sluggish.

“The standout would be Germany, which has been able to maintain robust levels of capital investment,” said Simon Rawlinson, head of strategic research at construction-consultancy Arcadis . “Most others have not.”

Before the crisis, cheap mortgage lending helped drive housing construction in markets like Spain and Ireland. Spain’s construction sector started to collapse in 2008, as the market was clogged by the building boom. The bust saddled banks with billions of euros in bad loans, forcing lawmakers to request a €41 billion bailout from the European Union to shore up confidence in the stability of the country itself.

The signs of life in Spain’s building sector come as the number of unemployed has declined and as the country’s economy—the fourth-largest in the European Union—is expected to grow more than 2% in 2015, among the strongest performers in the region.

But the country’s recovery is a modest one. Unemployment is still a staggering 23.7%, the highest in the EU after Greece.

An increase in construction now “doesn’t mean that everything is going well in the real-estate sector,” says Mr. Rodríguez de Acuña. “Construction is happening in very specific areas and at very competitive prices, which is why they are able to sell it.”

Original story: WSJ (by Jeannette Neumann in Madrid and Art Patnaude in London)

Edited by: Carmel Drake