Tag: Funcas

Why Are So Few New Homes Being Built In Spain?

20 October 2017 – Invertia

The construction of new homes is recovering very slowly and proof of that are the 65,000 new homes that were started in 2016; but whilst that figure exceeds the levels seen during the first few years of the crisis, it is still a long way below the 700,000-800,000 homes that were started each year during the real estate boom, which saw builders start work on 1,000,000 units at its peak. The question now is why are so few residential developments being started in Spain?

Paloma Taltavull gives some clues as to why so few homes are being built in her article “The housing sector: now and in the future”, published in the Economic Information Notebooks by the Foundation for Savings Banks, Funcas. In it, she analyses the current housing situation, paying special attention to prices and explaining the reasons why rental prices are growing significantly, even though house ownership prices are not. Ultimately, she concludes that “an increase in the supply of rental homes, or owned homes, is the element that could eliminate the tension in the residential markets in Spain”.

Taltavull, Professor of Applied Economics at the University of Alicante, considers that at the moment, sufficient demand exists to start building 200,000  new homes. She thinks that “the absence of sufficient property developers is slowing down the processes to build new homes, despite the recovery in demand”, given that “the sector suffered badly during the crisis, with a high proportion of construction and property developer companies being destroyed”.

“One of the effects of the crisis that still hasn’t been resolved is the destruction of the production fabric, which comprised a high percentage of small- and medium-sized companies, which gave the market a great deal of flexibility”, explains Taltavull (…).

The Funcas collaborator points out that, currently, there is an insufficient network of house builders because they have disappeared, stressing that the small property developers that remain have not yet recovered their confidence, whilst the medium-sized and large companies do not have the capacity to construct very much.

The professor also highlights that “the price incentive is not giving a strong enough push to the construction sector”, given that although “there is surplus demand”, “credit is not flowing” because of the labour market and the decrease in wages, which is a logical reaction by the financial institutions. Paloma Taltavull points out that this problem is particularly acute amongst young people, who “have been mistreated in terms of salaries for a decade”, given that they are the largest cohort demanding homes, but they do not have the ability to pay and the banks will not grant them loans”.

The expert warns that a lack of new housing in the ownership market and an insufficient supply in the rental sector is driving the significant rise in rental prices that are currently being recorded. She considers that a “mix” between the construction of new homes and other measures to promote rental at a break-even point would be ideal. She adds that the Administrations have an important role to play, given that public housing policy is “absolutely key both for revitalising developments in areas that need them and for avoiding poverty”.

The professor thinks that the public initiative could push the private one, especially in the construction of the type of housing that people need, given that they would be adapted to their ability to pay (…).

Original story: Invertia

Translation: Carmel Drake

Spain property: Madrid waits for the signal to ‘go’

27 April 2015 – Financial Times

Is the influx of Latin American buyers a sign the capital has turned a corner?

Over the past decade and a half, making even a modest investment in Madrid’s housing market has been a bit like taking a rollercoaster ride. Since the market reached its peak in early 2008, average house prices in Spain have dropped by 35 to 40 per cent, according to a report issued in March by the Spanish Savings Banks Foundation, known by its acronym Funcas. New developments on the outskirts of Madrid have been some of the hardest hit.

Other figures suggest an even greater drop in values: also in March, the Spanish property portal Fotocasa.es calculated that the average home in Spain has lost 45 per cent of its value since the peak of the Spanish housing boom, with values in Madrid (a 44.6 per cent drop) representative, more or less, of Spain as a whole.

But both Funcas and Fotocasa.es report glimmers of light at the end of the tunnel: Fotocasa.es recorded a 1 per cent increase in home prices in Madrid in February, while Funcas says that the Spanish housing market is now in an “incipient, gradual recovery”.

As in Barcelona and the Balearic Islands, where small price rises have also been recorded in recent months, overseas buyers are helping to create a mild sense of optimism.

In Madrid, the most enthusiastic foreign homebuyers are heading from across the Atlantic, rather than Europe, according to Alberto Costillo, prime residential director at Knight Frank Spain. A “perfect storm” is bringing a new wave of wealthy Latin American house-hunters to Madrid, particularly from Mexico, Colombia and Venezuela.

“Madrid has advantages of culture and language, and Latin American buyers have long thought of Madrid as a safe haven. But with an improving Spanish economy, and the recent fall in the value of the euro [Latin Americans are more likely to have savings in dollars than euros], they see now see a real opportunity here,” says Costillo.

With its pretty boating lake and rows of statues, many wealthy foreign buyers look to purchase property near the city’s celebrated Retiro Park.

In the grid-like Salamanca district adjacent to Retiro Park, Knight Frank is selling a three-bedroom, two-bathroom apartment with 187 sq metres of living space, parquet floors and air conditioning in a building dating from the early 20th century for €1.47m.

In the well-heeled neighbourhood of El Viso, part of the Chamartín district north of the city centre, a 402 sq metre duplex apartment with four en suite bedrooms and a txoko — a combined cooking and dining space more commonly found in homes in the Basque Country — has an asking price of €4m. On sale through the agency Rimontgó, the unit has three parking spaces and the building has a pool and a gym for residents’ use.

“[El Viso is] quiet and exclusive, but also well-connected with the rest of the city and within easy reach of the downtown,” says José Ribes, director-general of the agency handling the sale. “This is a part of town most associated with aristocrats and intellectuals, but in recent years it has attracted people working in the financial sector, politicians and sportsmen.”

Salamanca and Chamartín are home to many of Madrid’s best restaurants. The capital has 12 Michelin-starred restaurants, compared with 23 in Barcelona. But Madrid is the only one of the two cities with a three-star restaurant — David Muñoz’s DiverXO, where dishes are called “canvases” and diners are asked to arrive “with an open mind”.

Central districts of Madrid are densely populated, but some of the city’s satellite communities, particularly to the northwest, offer more leg room for buyers. In Pozuelo de Alarcón, nestling among pine trees and benefiting from cool breezes from the nearby Sierra de Guadarrama mountains, a gated housing estate called La Finca is home to some of the capital’s wealthiest residents, including footballers from Real Madrid such as Cristiano Ronaldo.

Typical of the sprawling, cubist-style homes at La Finca is a five-bedroom, seven-bathroom house with almost 2,000 sq metres of living space. The property has a two-bedroom housekeeper’s apartment, a lift, indoor and outdoor pools, a gym, a sauna, a cinema, a wine cellar and a carport for six vehicles. On sale through La Finca Real Estate for €11m, the house stands on a plot of just over a hectare. However, according to one estate agent who prefers to remain anonymous, potential buyers are sometimes put off La Finca “because of its reputation as a playground for soccer stars”.

On Calle de Serrano, a broad, tree-lined avenue in the Salamanca district which is sometimes referred to as Madrid’s golden mile for its high-end shopping, there are few signs of the economic downturn, dubbed la crisis in Spain. However, the recession has hit some of the city’s public infrastructure.

Guillermo Bernardo, a former banker with two young daughters who now runs his own cabinet-making business, points to cutbacks in the maintenance of neighbourhood parks and gardens. “The Retiro is Madrid’s calling card, and it’s immaculate, but there is less money these days to clean and repair local playgrounds,” he says. “The perception that most people have is that the state of the economy hasn’t changed a lot but we may be about to turn a corner. Nothing is forever, not even la crisis”.

Buying guide

● Buyers should budget 6 per cent of the sale price to cover land registry taxes

● Estate agents typically charge vendors a commission of 3 to 5 per cent

● Madrid has the third largest metropolitan area in the EU by population size

● Units in a building without a lift are unpopular and may be difficult to resell

● Madrid has hot, dry summers and cool, usually sunny, winters

● Violent crime is rare but pickpocketing and bag snatching can be a problem

What you can buy for . . .

€500,000 A modern, 90 sq metre flat with two bedrooms in the Chamartín district of Madrid

€1m A 140 sq metre, three-bedroom apartment in the Salamanca district, within walking distance of Retiro Park

€5m A seven-bedroom house in El Viso with an outdoor pool on a plot measuring 1,000 sq metres

Original story: Financial Times (by Nick Foster)

Edited by: Carmel Drake

Real Estate Starts To Drive GDP Again After 7 Years In Decline

6 April 2015 – El Mundo

On the demand side, household consumption and the recovery in investment in the construction sector are the components that drive growth. And, on the supply side, construction has reappeared on the scene again after seven years of harsh decreases. The same elements with which the crisis started in 2007.

In light of this data, the recovery is therefore bracing itself with identical components to those that led to two recessions, in particular the return of property.

The fact is that, although it is likely that errors from previous periods will not be committed, for example, the abolition of tax deductions, incentives for developers and easing of credit, housing has had an important impact both on the banking sector, as well as on the economy as a whole. For this reason, many analysts think that the production model of the Spanish economy should be more diversified and depend to a lesser extent on construction.

Most of the indicators suggest that the property market has been stabilising since 2014 and is now brimming with strength. The recovery in the gross added value of the sector is already materialising. After 24 consecutive quarters of negative growth, with annual decreases of more than 15% in 2010 and 2012, the sector recorded its first, albeit meagre, upturn (0.02%) in the third quarter of 2014 and bounced back forcefully in the fourth quarter, growing by 3.4%.

All of this has meant that construction at current prices (€53,829 million) accounted for 5.1% of GDP. It still only accounts half of what it represented at the start of the crisis in 2007 (10.1%). But experts expect a rapid acceleration.

In terms of investment in construction, possibly catapulted by the activation of public works in the face of new electoral commitments and also by the increase in building (activity), the sector recorded its first positive annual growth rate since the crisis (and the second quarterly increase) after 26 quarters of consecutive decreases. Therefore, the decline is deemed to have come to an end.

Specifically, residential investment increased by 0.4% in inter-quarterly terms during the last three months of 2014, whereby completing four quarters of gains. According to the Bank of Spain, all of this seems to mark “a change in the cycle for this component of demand”. Moreover, the indicators available from the first quarter (of 2015) point to a continuation of this trend in a context in which new building permits recorded a new upturn.

Meanwhile, the notarial statistics show that house transactions increased by 20% at the end of the year, with an average transaction volume of 30,000 homes per month. This recovery is concentrated in the segment of used homes and is continuing to benefit from the increase in purchases by overseas citizens. Now Spanish citizens have joined the drive to make house purchases.

Other indicators in the real estate market also show the same trend, with an increase in house sales and in house prices. Thus, in 2014, for the first time since the crisis started, the segment experienced a positive average annual increase (0.3%) following decreases of 10.6% and 13.7% in 2013 and 2012.

But, as Santiago Carbó and Francisco Rodríguez note in a report prepared for Funcas about the start of the recovery in the market, the real estate and construction sector “have unquestionable importance for the economic growth of Spain”. For this, they say that now that the economy is recovering “the role of (the) construction (sector) will become significant, sooner or later”. Above all, it is important for the generation of employment. In this way, construction contributed more than any other sector to the creation of more than 96,000 new Social Security memebrs in February; construction alone accounted for 26,000 jobs, i.e. more than a quarter of the total. The number of social security contributors has returned to one million (people); in 2006, there were 2.5 million. In terms of employment, the number of people has decreased by 62,000 with respect to the same month last year.

The emergence of the construction sector in (terms of GDP) growth will be more important this year and in the future. According to the Bank of Spain, the recovery of the added value of construction companies has continued during the first months of 2015. Meanwhile, Funcas indicates that, as a result of the more vigorous than expected behaviour of consumption and construction, GDP (growth) should reach 3%, versus the 2.8% that the Bank of Spain currently predicts.

Original story: El Mundo (by Francisco Núñez)

Translation: Carmel Drake