The Housing Stock Is No Longer A Problem In 36 Provinces

9 February 2016 – Cinco Días

Improvement of the housing situation goes on. The increase in housing sales continues to drain the stock of new homes for sale, though perhaps at a slower pace than might be expected. The latest data of the Confederation of Construction Products Manufacturers Associations of Spain (Cepco) states that at the end of the third quarter of 2015 the surplus for sale amounted to a total of 507,477 homes, 5.14% lower than at the end of 2014.

In aggregate terms it still seems a figure too high to think that in 2016 many homes will be built, although we must remember that from the peak reached in 2009 (when it amounted to 687,953 homes) the stock has decreased a 26,2% in six years.

But in the real estate market what is of importance is the analysis by territory, since while in some provinces the increase in transactions have been reflect double digit figures for months, in others the activity remains still quite weak.

This is one of the factors that explains how – if those data are currently analysed by province stock, we can see that there are already over 36 of them below 1,500 houses per 100,000 inhabitants, a level considered by sector experts to be acceptable. Among them we find Madrid, Barcelona and Valencia, the three major population and activity centres in the country, but the three Basque provinces, Navarre, where there is no longer a housing surplus, the four Galician provinces, and other areas washed by the Cantabrian Sea also lead the classification

Likewise, the stock volume in all the Andalusian provinces (except for except Almería) in both Extremadura (Badajoz surplus has no surplus) or five of the nine provinces of Castilla y León and the two archipelagos is not worrisome.

The ‘crown’ of Madrid

On the contrary, where there is oversupply of new homes is in three of the five provinces bordering Madrid: Toledo, Ávila and Cuenca, while Guadalajara y Segovia are below the psychological limit of 1,500 houses per 100,000 inhabitants. Precisely this proximity to the capital and the construction of new transport infrastructure were the factors that spurred housing construction in these three provinces, when it was thought that the locations closer to Madrid could end up becoming dormitory towns for thousands of citizens working in the capital.

Not that close to the big city, but also influenced by the construction maelstrom, Ciudad Real appears as one of the provinces with more stock, at the same level as Teruel or Lérida. However, no province comes close to the alarming situation of Castellón which with 4,650 homes per 100,000 inhabitants leads the ranking made by the building materials manufacturers.

These differences in supply of new homes from one province to another is what has favoured that while building cranes have reappeared in the landscape of some large cities, neither have they arrived nor are they expected in others due to oversupply of new construction still for sale or rent. Nevertheless, in the absence of knowing the closing data published by the Infrastructures Department, 2015 will be the first year of the last seven (since 2008) in which the volume of homes started exceeds that of finished homes. This is because Cepco confirms with figures from the colleges of surveyors how from past January to October the building of 39,781 homes was started and 37,497 were finished. The areas with more economic growth and better jobs are the ones concentrating the higher volume of building certifications, which has made both variables to cross again.

A year to strengthen the sector’s recovery

Developers, builders and ultimately all subsectors that depend to some extent on the real estate business, have started this 2016 with the hope that it will become the year in which the recovery takes place. The main research services made their projections for 2016 and 2017 with a focus on labor market performance, the financing flow and the evolution of interest rates.

In this scope, except in the event of major surprises derived from a global catastrophe, all estimates agreed that the purchases of homes continue to rise at moderate rates, prices would not increase far beyond what is considered reasonable (between 3% and 5% except in places with occasional shortages of supply) and certifications to start promotions would focus on areas with less stock.

In such market analyses, only a few remember that 2016 would begin after an electoral process, so that the composition of the new government was mentioned as a risk factor, although it is not defined as a determining factor. Now, 50 days after the elections, given the direction the negotiations between the parties are taking, some experts are beginning to recognize that perhaps the political factor in making the projections was underestimated. The figures for the next few months will tell.

Keys and data

Housing Lists: Visiting each of the new building developments and quantifying the supply of homes would be the best method to calculate the stock, but it is certainly the most costly in human and technical resources. TINSA is the only company that has so far made such an ambitious study, although not a pure housing list.

Calculations: Cepco uses the methodology of the Infrastructure Department, which is subtracting sold homes from finished homes.

Population: To calculate the rate per 100,000 inhabitants, the data quarterly published by the INE are taken into account.

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Aura Ree