Spain Needs 150,000 New Homes Per Year But the Market is Capable of Delivering Only 75,000

16 May 2019 – El Confidencial

According to the experts, on the basis of the rate of formation of new households and for a healthy residential market, Spain needs to produce between 120,000 and 150,000 new homes per year. Those figures are a far cry from the 650,000 units that were constructed in 2007, just before the outbreak of the real estate crisis. Nevertheless, the latest data reveals that even 150,000 homes is too ambitious a target, at least for the next few years.

That is according to the latest Real Estate Pulsometer, compiled by the Cátedra Inmobiliaria in collaboration with the University of Málaga, which estimates that 70,400 new homes will be finished by the end of this year and 77,100 by the end of next year. In other words, half the number needed. The reason? According to José Antonio Pérez, Director General of the Cátedra Inmobiliaria, “In simple terms, the sector does not have sufficient manpower to build that many homes. There are sufficient numbers of qualified people – such as architects and surveyors -, but there is a distinct lack of basic labour, such as workmen and builders”.

Tens of thousands of jobs were destroyed in the construction sector during the crisis. At the height of the boom, the sector and its related segments employed almost 2 million people, but by 2017 (latest available data), that figure barely exceeded 800,000. In other words, almost 60% of the workers had disappeared. Most have either left the country (many were foreigners) or reinvented themselves in other sectors and are reluctant to return to construction now.

Employment in the construction sector has recovered slightly over the last three years, with almost half a million people working in the sector. But that figure is not sufficient to build the homes that the country needs, which means delays and higher construction costs.

Lack of bank financing

The situation is compounded by the lack of available land and the shortage of bank financing to launch those 150,000 homes. The banks are willing to finance just 65,000 homes per year, according to Juan Antonio Gómez-Pintado, President of Asprima (the Association of Property Developers of Madrid). Several alternative financing funds are trying to cover the gap but they are not enough.

It is also true that stagnant salaries and problems of affordability for young people are other factors at play against the construction of so many homes.

Original story: El Confidencial (by E. Sanz)

Translation/Summary: Carmel Drake

Ministry of Development: 100,733 New Build Permits were Granted in 2018

28 February 2019 – Idealista

In 2018, 100,722 building permits were granted to construct new homes, 25% more than a year earlier; a figure not seen since 2009, when 110,849 permits were granted, according to data from the Ministry of Development. Of the total figure, 79,453 were granted to build blocks of flats and 21,254 to build houses.

In this way, building permits have now recorded five consecutive years of increases. In 2013, they hit a historical low (34,288 units), a figure that represented a decline of 96% from the peak year of 2006 when 865,561 permits were granted.

Despite the good results in 2018, the construction sector considers that a healthy market is one that is capable of generating around 150,000 new work permits per year.

Why is it so hard to build 150,000 homes per year?

Daniel Cuervo, Director at Asprima, points to several factors:

– Building permits take a long time to be granted (…). In general, Town Halls take 14 months to grant a licence, on average (…).

– Financing has returned to the real estate sector, but it is not immediate (…).

– Urban planning in Spain is paralysed due to the high level of legal uncertainty (…).

Meanwhile, Daniel del Pozo, Director at Idealista/News, provides some additional explanations:

– Lack of awareness about how the market works and of the real demand by the Public Administration (…).

– The main land portfolios are owned by the banks, Sareb and the funds (…) which are all waiting for prices to rise before releasing the most sought-after plots.

– The political uncertainty, the threats of interventionalism and/or changes in regulation in the real estate market also play their role (…).

Original story: Idealista 

Translation: Carmel Drake

Madrid’s Town Hall Faces Compensation Payments of €1.6bn For Suspending Developments in SE of the Capital

16 May 2018 – El Confidencial

The suspension of the developments in the south-east of Madrid could cost the capital’s Town Hall as much as €1.6 billion, in other words, 34% of its annual budget. That is the calculation that two independent experts have performed on the basis of the execution of the Master Plan for the New Development Strategy for the Southeast of Madrid, which has led to the ‘de facto’ paralysis of all of the areas in the south of Madrid: Los Berrocales, Valdecarros, Los Cerros and Ahijones, the last large block of buildable land to the south of capital, which was destined to bring thousands of homes onto the market at affordable prices.

The report, compiled by Federico García Erviti and Gerardo Roger Fernández Fernández, experts in urban planning valuations, estimates that the indemnity payments for the Compensation Boards of Valdecarros, Berrocales and Los Cerros will amount to €1.58 billion. The Master Plan itself, compiled by the Town Hall, mentions possible compensation payments but does not quantify them.

According to this document, the number of homes will be reduced by two thirds – from 105,000 to 38,708 – ; also, the total surface area will be cut and several other modifications will be made to the plans.

Specifically, according to the report from these experts, we will be talking about a payment of more than €640 million for the Compensation Board of Los Berrocales, another €755 million for Valdecarros, whilst, in the case of Los Cerros, the indemnity payment will amount to €182 million. To all of these figures, possible additional compensation payments to each one of the owners – around one thousand – will have to be made, who may also file claims with the Town Hall of Madrid, for example, for the taxes paid over the last few years for buildable plots, whose classification is now going to change on the basis of this Master Plan.

“The Master Plan does not have any legal validity to make a modification such as the one required”, said Juan Antonio Gómez-Pintado, Chairman of the Association of Property Developers of Madrid (Asprima), who considers that “during periods of real estate activity, such as the one the sector is experiencing at the moment, the effects of these measures and the damage for the city as a whole are irreparable, given that they have paralysed the only block of buildable land with these characteristics, where homes could be built for the lower and middle classes in the capital, driving those who want to buy a home at an affordable price out of Madrid”. Moreover, he considers that “the Master Plan will lead to significant increases in the price of land, whilst the legal uncertainty will scare off investors” (…).

The (Compensation) Boards filed an appeal against the Master Plan, as well as the legality of it, with the Supreme Court of Justice (TSJM), because they consider that “a pseudo planning instrument has effectively been approved. A town hall cannot approve an urban planning instrument”, and they have requested the precautionary suspension of it. The TSJM has admitted the appeal for processing but has not ruled on the matter for the time being.

Since the arrival of the new Government in Cibeles, “developments have slowed down and there have even been written requests for their agreements to be adapted to the Master Plan”, claim sources from Asprima.

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

Carmena’s New Plan Prevents Construction of 50,000 Social Housing Units in Madrid

10 April 2018 – El Mundo

The Compensation Boards of Valdecarros, Berrocales and Los Cerros have filed a contentious-administrative appeal requesting the precautionary suspension of the Master Plan approved by the Town Hall of Madrid in January, which prevents the construction of more than 50,000 social housing units in the southeast of Madrid.

The representatives of the three developments in the southeast of the capital have received public support from Madrid’s Association of Property Developers (Asprima), which considers that “the application of the Master Plan would have very negative consequences for Madrilenians by making house prices more expensive, in both the rental and purchase markets; it would cause serious harm to the municipal coffers due to the large number of compensation claims that the Town Hall would have to pay out”, say sources at the entity.

On the other hand, Asprima warns that the aforementioned plan “would prevent the construction of more than 50,000 social housing units and the development of important public housing construction plans for rental properties, and as a result, would lead to an increase in house prices, placing further pressure on demand in towns on the outskirts, and further congesting the access roads to the capital”.

The appeal highlights that the legal nature of the Master Plan is uncertain since it is not provided for in the Community of Madrid’s governing Land Law and that it should be considered as a binding directive or as a legal planning instrument, which may be appealed and suspended in a precautionary way.

Moreover, “the Master Plan has been built as a figure with regulatory strength, but it was approved by the Government of the Town Hall of Madrid without a prior report from the General Intervention or any report from the municipal legal services. Similarly, it was not subjected to any public consultation to allow citizens to express their opinions”, say sources at Asprima.

It is for this reason that Madrid’s Association of Property Developers considers that the Compensation Boards of Valdecarros, Berrocales and Los Cerros have sufficient legal grounds to request the suspension of the Plan and, in addition to the legal grounds, all of the economic and environmental data available to draw the conclusion that the developments in the southeast are absolutely necessary for the city.

Original story: El Mundo (by S. V.)

Translation: Carmel Drake

Are Spaniards “Condemned” to Buying Second-Hand Homes?

4 February 2018 – El Confidencial

Only 18% of the homes sold last year were new build properties. 

It is the dream of thousands of Spaniards: to buy their own home and, wherever possible, for that home to be brand new. Nevertheless, it is a dream that now, more than ever, only a lucky few are managing to realise. In 2017 – based on data for the 11 months to November from the National Institute of Statistics (INE) – more than 350,000 second-hand homes were sold in Spain – comprising second and subsequent sales for statistical purposes – compared with just 77,500 new homes – first sales -. In other words, the latter accounted for just 18% of the total number of transactions.

That has not always been the case. At the height of the crisis – between 2008 and 2013 – and as a consequence of the huge stock of unsold new homes that was generated during the real estate bubble, sales of both types of homes were pretty much the same. However, all indications are that new homes are going to continue to be a scarce product and only affordable for the lucky few, given that estimates for the property development sector as a whole indicate that activity is going to normalise at an output rate of around 150,000-200,000 units per year, a figure which the experts consider corresponds to the natural demand for housing, in other words, to the creation of new homes. These numbers come in stark contrast to the 850,000 new homes that were approved in 2006, the highest figure in the historical series.

To put it in context, 81,500 (new home) permits were granted last year, up by 27% compared to the previous 12 months, but still only half the number that property developers expected to reach and 10 times fewer than at the height of the boom.

Property developers dream of reaching those figures in the short term, nevertheless, some voices have already started to warn about the possibility that they may not be able to achieve it due, on the one hand, to a lack of land – plans and urban development projects have been suspended all over Spain, and in particular in markets with lots of demand for housing such as Madrid – but also, and above all, due to a lack of financing.

There will not be financing for 150,000 homes

That was stated publically this week by the President of Property Developers in Madrid (Asprima), Juan Antonio Gómez-Pintado. “The problem is that the market is heading towards 150,000 homes per year, whilst bank financing looks set to provide for just 65,000 homes” (…)

Despite those storm clouds, if there does end up being enough money to go round, will people on the buy-side be able to afford the new homes? For months, real estate debates have been raging about the fact that the homes that are being built at the moment are not affordable for most buyers, which primarily constitute owners looking to reposition themselves – people who already own a home and who want to sell it to buy a better one -.

“The demand is not willing to assume future increases in house prices (…)”, said Ignacio Moreno, CEO of Inmoglacier just a year ago.

The lack of product for sale and the high costs of construction are being passed on in the final prices of homes and also in the prices of land. And all indications are that the rising spiral is set to continue and may even intensify. “Land prices are going to continue to rise, following in the footsteps of housing but multiplied by three. In other words, if house prices go up by 5%, land prices will rise by 15%”, calculates Mikel Echavarren, CEO at Irea.

Price gap

In this way, according to data from INE, during the third quarter of 2017,  the prices of both new build and second-hand homes rose by 7%. And it is the very lack of new build product that is inevitably pushing up prices. But that same shortage is also forcing demand towards the second-hand market, which is also pushing prices up, although, at the national level, the price gap between second-hand and new build homes has been increasing in favour of the latter (…).

Nevertheless, the price per square metre of a new build home is not always more expensive than a second-hand property. El Confidencial has compared the prices per square metre of new build homes in several districts of Madrid and Barcelona, as reported by Socieded de Tasación at the end of 2017, with the prices of second-hand homes, according to the real estate portal Fotocasa, and found that in some cases second-hand homes are more expensive.

How is that possible? The real estate portals show asking prices – not the prices at which operations are actually closed. According to a recent study performed by this real estate portal, in the last year, 71% of buyers obtained an average reduction (on the asking price) of €14,000, a figure that in the majority of cases represented a discount of 10% on the initial sales price (…).

On the other hand, for statistical purposes, when we talk about second-hand housing, we are not always taking into account the age of the property, but rather the number of times that the home has changed hands. Many developments in the hands of the banks are considered second-hand because there has already been a prior transaction involving that property – from the bankrupt property developer to the bank, for example – This means that when such a home is sold it is considered as a second-hand property, even though it may never have actually been lived in. And the prices of those units tend to be higher than those of homes that are several years old (…).

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

Property Developers & Banks Forecast Bullish RE Cycle Until 2022

8 February 2018 – Cinco Días

The official results just keep on giving to the property developer sector and, therefore, to the banks as well. Sales are growing, the cranes are multiplying and credit is flowing; and best of all, according to the experts, all of these things are happening in an increasingly more homogeneous way, in other words, in more places around the country.

Since we are dealing with a market in which the laws of supply and demand apply, house prices are also moving upwards, but in a much more moderate way than in the past. Moreover, there are no signs whatsoever of a slow down. So much so that the property developers and banking experts agree that, unless we are hit by an economic catastrophe, the current cycle may continue for another five years, until 2022.

Currently, the most worrying thing is that this rally in prices may come to an end and lead to a situation involving the reemergence of the ghosts of the past. According to the Executive Director of Companies at CaixaBank, Luis Cabanas, speaking yesterday in Madrid, “We cannot allow another bubble to occur in the real estate sector”.

Cabanas made that reflection on Thursday in the context of the third edition of the Meeting of Real Estate Financing in Madrid (Efimad), organised by the property developers of Madrid’s trade association (Asprima) and CaixaBank. In addition, the President of that business organisation, Juan Antonio Gómez-Pintado, regretted that during the years of crisis, the legislator did not take advantage of the opportunity to reform the legislation in order to avoid the problems inherited from the former boom.

Above all, he highlighted the slowness of the process to develop land, the inefficient management of licences and the excessive “judicialisation” that exists in the sector, which increases legal insecurity in an alarming way. Carlos Casanovas, Corporate Director of Real Estate at CaixaBank, insisted that the fundamentals of the economy are solid and expressed his desire for players to continue being cautious “even though things are now going better”.

In terms of the challenges ahead, the property developers Aedas and Aelca agreed that the professionalization of the sector is now a reality, as is the industrialisation of the construction process. The risks include making the same mistakes again, such as buying very expensive land because of expectations of future house price rises.

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

26 Spanish Real Estate Experts Share Their Predictions for 2018

6 January 2018 – Expansión

House prices will rise by more than 5% on average this year, with increases of more than 10% in the large cities. These gains will happen in a context of great dynamism in the market, in which house sales will grow by more than 10% to exceed 550,000 transactions. Rental prices will also continue to rise.

Those are just some of the predictions made by 26 real estate experts for Expansión.

Aguirre Newman: “House prices will grow by more than 10% in Madrid and Barcelona”.

“In our opinion, house prices are going to continue to rise in 2018, reaching average growth rates of 6%-7%”, says Juan Riestra (pictured above, top row, second from left), Director of the Residential Area at Aguirre Newman. “In Madrid, Barcelona and the coastal cities, we expect to see double-digit growth, driven by the supply of new homes that the property developers have announced, which will result in an even more intense increase in prices than seen in 2017 since new build home are typically more expensive than second-hand properties”, he adds (…).

Fotocasa: “New build homes will have a higher profile in 2018”.

“New build homes will have a higher profile in 2018, as we have already seen during the last quarter of 2017. And that, combined with the return of confidence to the housing market, will continue to push prices up if the economic context is maintained and the situation in Cataluña is resolved”, says Beatriz Toribio (pictured above, bottom row, second from left), from Fotocasa, who thinks that this effect will drive up house prices by more than 5%, but not reaching double-digits (…).

Universitat Pompreu Fabra: “Everything depends on the situation in Cataluña”.

“The upward momentum in the market will be accentuated in 2018 due to the improvement in the new build market since the homes that started to be built two years ago are now being sold”, said José García Montalvo (pictured above, top row, second from right), Professor of Economics at the Universitat Pompeu Fabra. “The major change is that new homes now account for 20% of the market, whilst before they represented 60%” (…). But “everything depends on the political uncertainty in Cataluña” (…).

Arcano: “Demand for investment in housing will continue to grow”.

“There is still a very significant imbalance in terms of demand, spurred on by the ECB’s policy and labour improvement, and a supply that is still restricted by the very low level of new house starts. Moreover, demand for housing as an investment will continue to grow. In this context, prices will rise by more than 5%”, says Ignacio de la Torre, Chief Economist at Arcano (…).

Notaries’ Centre for Statistical Information: “We expect house prices to increase by more than 5%”.

“On the basis of our analysis of the available information, we expect house prices to grow by between 5% and 10% in 2018 (…). Although we expect the housing stock to increase, due to greater investment and employment in construction in recent months, which may lead to price rises being contained, we also expect an increase in demand, given the dynamism of economic activity and the behaviour observed in the labour market”, says Milagros Avedillo, at the Notaries’ Centre for Statistical Information. In her opinion, the growth in mortgage loans will be single-digit.

Asprima: “Very few new homes will be built”.

“I don’t think that the volume of transactions will increase by more than 10% and the forecast for price growth will be below 5%”, says Carolina Roca, Vice-President of Asprima. “The most important macro-factor is income”, she laments. Therefore, prices cannot rise by much, in her opinion, although they will increase in certain areas. “New builds will recover in 2018, but not by much (…)”.

Tinsa: “The reduction in the unemployment rate will boost the market”.

“The residential market will record moderate price growth in 2018 (of between 3% and 4%), similar to that seen in 2017, with different speeds, depending on the region”, says Pedro Soria (pictured above, bottom row, second from right), Commercial Director at the appraisal company Tinsa. “The recovery will expand to more areas; the large capitals will continue to be the drivers, although the rate of growth will soften”, he adds. “The reduction in the unemployment rate and continuing investor interest, due to the prolongation of the low-interest rates, will increase house sales by between 10% and 15% (…).

Sociedad de Tasación: “New house prices will rise by 5.4%”.

“Applying our predictive model to the data from the Ministry of Development, we estimate that 14.1% more house sales will be completed in 2018 than in 2017 (…)”, says Consuelo Villanueva (pictured above, top row, far left), Director of Institutions and Key Accounts at Sociedad de Tasación. “The result (…) indicates growth of 5.4% in the price of new homes under construction for the average of provincial capitals in 2018 (…)”.

Gesvalt: “Mortgage lending will rise by around 15%”.

“According to the forecasts at Gesvalt, we predict moderate growth in second-hand house prices of around 5% at the national level, although there will be notable differences between provinces”, says Sandra Daza (pictured above, bottom row, far right), Director General at Gesvalt. (…). And by how much will mortgage lending grow? “By around 15% and there will be a slight increase in the number of mortgages that exceed 80% of the total property value”.

Foundation of Real Estate Research: “The political uncertainty will weigh down on Barcelona”.

The President of the Foundation of Real Estate Research, Julio Gil, believes that house prices will rise by “between 0% and 5% in 2018. “We will move to a three-speed market”, he thinks, referring to consolidated areas, cities in recovery and provinces with a surplus supply and/or limited demand. “And I think that Barcelona will perform less well than Madrid, weighed down by the political uncertainty”, he adds (…).

Pisos.com. “Mortgage lending will rise by more than 10% for the fourth consecutive year”.

According to Ferran Font, Head of Research at Pisos.com (…) “Historically low interest rates and the decrease in unemployment mean that we expect mortgage lending to grow at double-digit rates in 2018, like it has done for the last three years”.

General Council of Real Estate Agents: “The rise in rents will lead to tension in sales prices”.

“House prices will grow by around 5% in 2018, driven more by the refuge effect of savings than by objective economic variables”, says the President of the General Council of Real Estate Agents, Diego Galiano. “Savings are not being rewards and housing is recovering a certain degree of stability and offering good prospects for investors (…)”.

TecniTasa: “Prices will grow by around 5%”.

“On average in Spain, we estimate price growth of around 5%, but we highlight that that figure represents an average of a very heterogeneous market, by area and asset class. In some regions and for certain types of high-end homes, the increase will amount to between 5% and 10%, and may even exceed 10% (for example, in the Balearic Islands). Whilst in small towns and for cheaper homes, prices are barely expected to rise at all in 2018”, says José María Basáñez, President of TecniTasa (…).

Civislend: “The mortgage war will intensify”.

“The growth that we will see in terms of mortgage lending is going to continue to reflect double-digit rates and the war in terms of granting loans by financial institutions is going to intensify”, says Manuel Gandarias, Director and Founder of the real estate crowdlending platform Civislend (…).

Acuña & Asociados: “80% of sales will be made in 400 towns”.

“Given the current situation, the expected growth in prices at the national level for 2018 will amount to around 5.5%”, forecasts Luis Rodríguez de Acuña. However, “demand for housing is not behaving in a homogenous way across the country, and transactions are only being recorded in 1,300 of Spain’s 8,125 municipalities”. In other words, in one out of every six. And 80% of transactions “are being closed in just 400 municipalities (…)”. (…).

CBRE: “The sale of new homes will continue to gain weight”.

The value of homes will increase “by around 5% YoY at the national level, with higher rises (between 7% and 10%) in certain markets such as Madrid, Valencia, Málaga and the Balearic Islands”, predicts Samuel Población (pictured above, top row, far right), National Director of Residential and Land at CBRE (…). “Sales of new build homes are going to increase their relative weight (with respect to second-hand homes) as a result of the recovery in construction output; nevertheless, the recovery will not have an immediate impact on transaction volumes given the time lag associated with new build developments”, he says.

BDO: The land market is preventing soaring construction output”.

“We are facing a very favourable macro context (GDP and employment, above all) and therefore, an upwards cycle is likely, which will have different regional rates”, explains Alberto Prieto, at BDO. (…). “The launch of new build projects by the new large players will start to be felt in 2018, and then more intensely in 2019”, he adds. “The situation in the land market makes it unfeasible for the volume of new build homes to soar for the time being”, he says.

Foro Consultores Inmobiliarios: “Fixed-rate mortgages will play an important role”.

Carlos Smerdou, CEO at Foro Consultores, believes that “new build homes will drive the market and that recent land transactions indicate that the trend in terms of prices will be upward, of between 5% and 10%” (…). In terms of fixed-rate mortgages, “they will play an important role”, despite the fact that “interest rates are forecast to remain negative”.

MAR Real Estate: “Banks are still reluctant to grant the necessary financing”.

Rosario Martín Jerónimo, representative of MAR Real Estate in Marbella, believes that house prices will grow by more than 5% in Spain this year, on average (…). Nevertheless, she does not think that sales or mortgage lending will be as high in 2018 as they were in 2017 and that the growth rates will remain below 10% in both cases. “Buyers are willing but the financial institutions are still very reluctant to grant the necessary financing”, she explains. “Many property developers are completely financing their projects using money from private investors/buyers, without any support from the bank”, she says (…).

uDA (urban Data Analytics); “Prices will rise by more than 10% in the large cities”.

“House prices will rise by around 6.9% in 2018, although the behaviour will be tremendously heterogeneous”, warns Carlos Olmos, Director of urban Data Analytics. In other words, there will be “some large cities with growth rates of more than 10% and many other capitals with small decreases” (…).

Gonzalo Bernardos, Professor of Economic: “House prices will rise by 11% and sales volumes by 23%”.

“I think that house prices will rise by 11%”, says Gonzalo Bernardos, Director of the Real Estate Masters at the Universidad de Barcelona (…). Moreover, in macroeconomic terms, it is the best scenario for the residential market: high (economic) growth (around 3%), the creation of employment, scarce new build supply (new build permits will amount to 125,000 in 2018), very low interest rates and bank willingness to grant mortgages”. “House sales will rise by around 23% and mortgage lending will increase by 17%”.

Irea: “House prices will rise by more than 7% in consolidated markets”.

Mikel Echavarren (pictured above, bottom row, far left), CEO of the real estate consultancy and advisory firm Irea, forecasts that house prices will rise by between 5% and 10% in 2018 with respect to 2017. “In consolidated markets, the increases will be closer to 7%”. (…). In the mortgage market (…), “in theory, financing conditions will continue to be very beneficial for buyers and property developers”, he adds.

College of Registrars: “Mortgage lending will grow by around 20%”.

The registrars believe that house prices will rise by less than 5%. “Taking into account our data and the slowdown that is already being seen in Cataluña, which accounts for approximately 17%-18% of the Spanish housing market (…), we think that it will be hard to exceed a growth rate of 5% in 2018”, explains Fernando Acedo Rico, Director of Institutional Relations at the College of Registrars. (…). Something similar will happen with mortgage lending, which “will continue to grow at around 20%”.

Idealista.com: “Madrid will drive the price rises”.

According to Fernando Encinar, Head of Research at the real estate portal Idealista, house prices will rise by less than 5%. (…). “There will be cities that will experience a more acute recovery, such as Málaga, Valencia, Sevilla and the islands. But I think that Madrid is going to be the real driver, with even more accelerated price growth”. Why? “The Spanish capital is gobbling up talent and investment, and demand there indicates that prices are going to continue to rise. There is minimal stock left in Madrid (…)”.

Instituto de Práctica Empresarial: “In 2018, 550,000 homes will be sold in Spain”.

According to the Director of the Real Estate Chair of the Instituto de Práctica Empresarial, house prices will rise by 6.1% in 2018 (…). In Spain, 550,374 homes will be sold, which represents 14.5% more than in 2017, despite the sluggishness that may be seen in Cataluña.

Invermax: “Tourist areas may see price rises of 10%”.

Jesús Martí, Real Estate Analyst at Invermax, thinks that “house prices will grow by another 5%, with this average varying between the large cities and the traditionally touristy coastal areas, where they may rise by 10%”. “It is still a good time to buy a home, especially for investors”, he adds (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Land Shortage Causes House Prices to Soar in Madrid

5 November 2017 – El Mundo

House prices are on the rise in Madrid, due to the shortage of available buildable land and the high pent-up demand (the Spanish capital is capable of absorbing around 10,000 new homes per year and just as many second-hand homes). That was one of the main conclusions from the meeting organised last week by El Mundo in collaboration with Distrito Castellana Norte (DCN) to analyse the likely impact of the 11,000 new homes that are being planned as part of Madrid Nuevo Norte, the official name for the project more commonly known as Operación Chamartín.

According to Luis Corral, CEO of Foro Consultores, Madrid Nuevo Norte is an “absolutely essential project for that area of Madrid”, because both of the existing urban developments, namely, Valdebebas and Arroyo del Fresno, as well as the neighbouring municipalities, Alcobendas and San Sebastían de los Reyes “have run out of land”. In his opinion, “anything that places this part of Madrid on the market is a good thing, even if it causes price inflation, as seen in Valdebebas, where homes now cost more than €3,000/m2″.

Beyond its importance from a residential perspective, “Madrid Nuevo Norte also involves a major urban regeneration project, which offers a golden opportunity to position Madrid as one of the greatest capital cities in Europe”, according to Carolina Roca, Vice-President of the Association of Property Developers in Madrid (Asprima). In this sense, the final plans – which will probably be approved during the course of next year – include the construction of a large business centre, as well as a major refit of Chamartín station (which will house the future headquarters of Adif and Renfe).

Although this is an ambitious project from every perspective, “the area to the north of Madrid has capacity to absorb much higher figures than the 11,000 homes currently forecast”, says Samuel Población, Head of Residential and Land at the consultancy firm CBRE. “The absorption rate that we have seen in Valdebebas in just five years serves as an example”, he adds.

Moreover, the current rates of house building confirm that demand is continuing to grow right across the Community of Madrid. Based on the number of construction permits granted, the region is currently building 22,000 properties per year, a figure that contrasts with the 80,000 properties that are going to be built in Spain as a whole in 2017. According to Roca, “property development is performing well in Madrid, but the same dynamism is not being replicated across the country and so, we are still a long way off the 150,000 homes per year that need to be built”. That means that the region “has doubled its weight, something that is not positive because Madrid cannot cope with the real estate business of the whole of Spain”.

But the main problem, according to the head of the Madrilenian property developers, is that the municipal authorities are not responding to this increase in demand by offering new plots of land. “The available buildable land will have been used up in three or four years and no one is performing the repositioning that is necessary for after that period”. (…).

The main consequence of the shortage of raw material in the hands of property developers “is a significant rise in the prices of plots, which end up being passed on in the form of more expensive house prices”, explains Población (…).

In this context, Corral also stressed the need to promote new urban developments as “generators of homes for the most disadvantaged households, as shown by the more than 2,200 social housing units included in Madrid Nuevo Norte (…).

Original story: El Mundo (by Rubén G. López)

Translation: Carmel Drake

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

House Prices Forecast To Rise By 5% In 2017

6 June 2017 – Expansión

Growth / The sharp fall in house prices during the crisis years, combined with the pent-up demand, the reactivation of mortgage lending and the recovery of the Spanish economy means that property developers, appraisal companies, real estate companies, funds and consultants alike are all predicting fresh rises in house prices this year. Nevertheless, the professionals stress that the growth in prices will vary by area, with Madrid and Barcelona leading the recovery.

In 2016, house prices rose by 4.7% in Spain on average, according to the National Institute of Statistics (INE). That growth rate was the highest since the burst of the real estate bubble, a decade ago. And the experts believe that that figure will not only be repeated in 2017, it will actually be bettered. “According to CBRE’s Trend Barometer which reflects the views of the 100 most senior directors in the real estate sector, one out of every two surveyed believe that house prices will grow by between 3% and 6% in 2017 at the national level, whereas only 21% shared that optimism in 2016. It is the first time since the start of the crisis that the experts are forecasting a general rise in house prices in Spain”, explained Adolfo Ramírez Escudero, President, CBRE Spain. (…).

According to the majority of the experts, the increase will amount to around 5% this year…(…).

Although all of the experts are optimistic about the overall trend in prices, several are quick to point out that this increase will vary by region. “The recovery in prices is proving selective and heterogeneous. Although prices are soaring in certain places, they have still not bottomed out in other markets”, said Pedro Soria, at Tinsa.

“Salaries have not risen to a level that makes us think that prices are going to soar, although there are some exceptions in specific areas of the large regional capitals where we have detected strong demand”, said David Martínez, CEO at Aedas Homes.

By area, Madrid and Barcelona account for the best forecasts in terms of price rises. (…).

Similarly, in addition to the two major cities, the positive outlook is starting to spread to new areas. “Prices are on the rise primarily in the major capitals and on the islands”, said Sandra Daza, at Gesvalt.

The improvements in the macroeconomic variables mean that the good feelings about the housing market this year are also expected to have an impact over the coming years. “House prices are going to continue to rise over the next few years. This year, we expect to see an average rise of around 5%, but the shortage of buildable land in those areas where demand exists means that we can expect to see higher rates of growth in the future”, said Javier de Oro, at Aliseda, the real estate arm of Banco Popular.

In this sense, and despite the price rises that have been seen in recent quarters, the experts point out that we are still a long way from the figures seen before the burst of the bubble. “We are entering a period of growth, which may last three or four years. It is true that there are cycles, but I don’t think that we’ll ever see the price decreases of the past again”, said Juan Antonio Gómez-Pintado, President of the property developer Vía Célere and of the sector organisations Asprima and APCE. (…).

Whilst in the case of new homes, the upward trend in prices seems clear, in the case of second-hand properties, a recovery is also being seen but at a slower pace. “So far this year, our real estate index has been registering very slight YoY decreases, of just a few tenths of a percentage point, which shows us that second-hand house prices in Spain are stabilising”, said Beatriz Toribio, Head of Research at Fotocasa. (…).

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake