Tag: obstacles

Azora: Spain Needs to Build 2 Million Rental Homes in 15 Years

12 January 2019 – El Economista

The rental market is gaining more and more followers in Spain and is now the way of life chosen by 20% of the population. That means that the market has doubled in size over the last 15 years, according to data from Eurostat. Nevertheless, its growth is running into many obstacles along the way, given that the increase in demand has not been accompanied by a rise in supply at the same rate, which has led to the saturation of certain markets, such as Madrid and Barcelona, where several neighbourhoods have experienced price increases of up to 18%, making them even more expensive now than they were during the boom period.

Faced with that situation, the major players in the market and the real estate experts assure that the construction of homes dedicated to rental and the policies to incentivise owners to place their homes on the rental market are two of the most important ways to provide agility to a mechanism that is oxidised right now.

“Rental is a sector with enormous social importance, on which more than 10 million tenants and more than 4 million small Spanish savers and institutional investors depend, who use the rental market as a way of supplementing their income and pensions”, explains Azora in a comprehensive report about the rental market.

In its study, the manager says that the rental housing deficit amounts to another 2 million homes, which will have to be built over the next 15 years to satisfy the increasingly growing demand. “Ensuring legal certainty and a contractual equilibrium is basic for attracting around €300 billion in private and institutional savings necessary to finance this new stock of homes. It is an investment equivalent to 30% of GDP over 15 years or 2% of GDP every year”, says the report.

For Azora, which is one of the largest managers of rental housing in Spain, the construction of these homes is fundamental if we are to avoid “structural imbalances between supply and demand, and it is vital to guarantee access to housing through the rental formula for millions of Spanish families, especially the youngest in society and most vulnerable families”. In this way, according to the Ministry of Development and Eurostat, rental has become the solution for accessing housing for 75% of young people in Spain aged under 29 (compared with 40% in 2007) and for 40% of families with a household income of less than 60% of the national average.

The major challenges

According to comments made by Azora in its report, the three most important challenges facing the sector are, on the one hand, “establishing a public social housing policy to resolve the situation of highly vulnerable people and those at risk of social exclusion”.

In Spain, social housing accounts for just 1.5% of the total, compared with the EU average of 15% (…).

Another challenge is “the creation of a rental stock at affordable prices, below market rates, for families with the lowest incomes and young people” (…).

Finally, the need to increase supply by at least another 30% over the next 15 years. “The problem today and in the future in the private housing market is not the increase in prices (which are still 15.5% below their 2007 peaks, according to data from the Ministry of Development), but rather the complete lack of available stock for rental compared with the sharp growth in demand”, says Azora (…).

Original story: El Economista (by Alba Brualla)

Translation: Carmel Drake

Ministry of Development: Spain Signed 60,000 New Home Permits in 2017

5 June 2018 – Eje Prime

Spain is still a long way from the dizzy heights of 2006, but its stock of housing is gradually recovering the colour it lost during the decade when the sun shone very little over the new build sector. Last year, 60,888 municipal licences were signed for the construction of new homes, which represents almost twice as many as the 31,213 permits that were granted five years ago, according to data from the Ministry of Development.

Moreover, in YoY terms, the increase in the number of licences for the construction of residential buildings was 6.5%, with even greater rises in certain autonomous regions, such as Cataluña, where the increase to November exceeded 50%.

Nevertheless, the region where most new homes are being built, Madrid, recorded a slight decline in 2017. Following a significant increase in the number of licences during the beginning of the new economic cycle, last year, that market for the construction of new homes lost speed with a decrease of 4.4%.

In total, in the Spanish capital and its surrounding area, 14,018 licences were signed last year for residential construction, a figure that doubles the number recorded in 2016, but which represents a decrease of more than 650 homes at a time when there is great demand from Spanish and international investors.

The recovery of the Madrilenian residential market is clearly understood in the increase in the number of licences for the construction of new homes experienced first between 2013 and 2015, and, more importantly, during 2016. Five years ago, 6,134 permits were signed in the central region, in an annus horribilis that followed a 2012 in which Madrid approved 17,000 licences. After that, 24 months of stabilisation in the segment with the registration of between 7,000 and 8,000 licences (in total) for new homes, proceeded a 2016 that doubled the figures with 7,500 administrative signings of contracts for residential development.

The shortage of land and the obstacles imposed by Town Halls such as Madrid’s (…) have led to a fall that is heating up the market and generating problems for the whole sector. Other autonomous regions, such as  Navarra, Aragón, Asturias and Murcia also recorded decreases in 2017, going against the tide (…) and once again showing signs that Spain is moving at two speeds in the residential sector.

Significant increases on the Mediterranean Coast 

The Mediterranean coast is proving to be the engine for new housing in Spain. Regions such as Cataluña, the Community of Valencia, the Balearic Islands and the Málagan section of the Costa del Sol are registering significant growth figures in terms of the number of licences granted for the construction of housing.

Cataluña is on a roll with the construction of homes, with an increase of 50% during the first ten months of last year. To November, 9,815 licences were signed and sources in the sector have said to Eje Prime that the forecast for the end of the year was 12,100 permits, up by 35% compared to 2016 (…).

Heading south, the Community of Valencia has developed in a similar way to the Catalan market over the last five years. It doubled its annual figures between 2013 and 2017, from 3,142 permits to 6,588, but the greatest increase came in 2016. In just twelve months, the Mediterranean region increased the number of licences from 4,712 to 6,540, up by 39%.

The markets in the Balearic Islands and Andalucía, where the Costa del Sol plays a prominent role, have also shown clear signs of improvement in recent years. On the islands, permits for new build almost tripled between 2015 and 2017 from 826 to 2,391 (…).

Meanwhile, in Andalucía, although the growth percentage was similar, the increase was calculated on a larger volume of homes. As one of the areas with the highest demand for new home permits, the region (…) closed 2017 with 12,363 licences. Just five years earlier, that figure barely exceeded 5,000 (…).

Original story: Eje Prime (by J. Izquierdo)

Translation: Carmel Drake

Spain’s Large Cities Are Running Out of Land for New Homes

18 February 2018 – La Vanguardia

Spain’s large cities, led by Madrid and Barcelona, are running out of developable land on which to build homes, primarily due to administrative obstacles, according to experts, who warn that this shortage is pushing up final prices.

The urban planning regulations establish very long turn-around times and are very rigid when it comes to changing the use of land to be able to adapt plots to the demands of citizens, according to the Managing Director of the property developer association Asprima, Daniel Cuervo.

Moreover, the political changes in the town halls typically involve changes in the development plans for cities, which means more delays in the land management process.

In his opinion, the regulations need to be simplified, to make them more agile, and legal certainty needs to be strengthened.

Cuervo has advocated placing the responsibility for large city urban planning in the hands of a body of independent experts who would decide what is best for citizens, without their decisions being affected by political ideologies.

Currently, in Madrid, there is developable land ready for the construction of around 20,000 homes, according to Cuervo, who points out that, although there are lots of plots, they cannot be used because they have “legal problems” and are indivisible, which complicates their use as sites for house building.

“In Madrid and the metropolitan area of Barcelona, there is land under development but the political decisions of the town halls to suspend urban developments is leading to an increase in the prices of buildable land and, therefore, in house prices”, he added.

The President of Quabit, Félix Abánades, underlines that the shortage of land and tensions in prices “are happening only in certain areas of the large cities” and recalls that, currently, the average price of land is less than half the value it reached in 2007.

“In general, as property developers, we are being more rigorous in our purchases”, said Abánades, who indicates that Spain currently has enough buildable land for approximately 1.5 million homes.

At the current and forecast rates of construction, “that land will supply the market for the next 8 to 10 years”, but in some very specific areas, such as Madrid, Barcelona, Málaga, Bilbao and certain coastal towns, land needs to be developed as a priority.

In his opinion, if there is a shortage of land today it’s because, during the years of the crisis, all of the urban planning management processes were suspended. Moreover, “absolutely essential” projects are still being blocked in cities such as Madrid, including the Castellana Norte project and several developments in the south-east of the capital.

“It is essential that the administrations streamline urban land management, and facilitate and promote the processing of new urban plans”, he said.

Property developers are facing enormous difficulties in the generation of buildable land and there is a paradox in that the areas with the most acute shortages of land are precisely those where demand for housing is highest. Ultimately, that is hurting buyers the most because homes are becoming more expensive, according to sources at Neinor Homes.

The stoppage caused by the crisis led to a mismatch between the creation of buildable land by the authorities and the absorption of that land by the property developers, say sources at the property developer.

“It should be possible to reach an agreement between the politicians, businessmen and technicians to enable a more efficient way of managing the land”, according to Neinor.

The CEO of Aedas Homes, David Martínez, added that, as demand recovers and the stock of homes decreases, inflationary tensions are arising in terms of the available land.

The urban transformation process in Spain (from land not suitable for development to developable land) is tremendously complex, causing processing times to lengthen beyond what is “reasonable and desirable”, increasing the investment required to build homes (…).

Spain is a country where new-build homes suffer from “lots of administrative obstacles” says the Head of Research at Pisos.com, Ferran Font, who laments that the municipal administrations do not facilitate the creation of suitable new products for the consumer, given that they forecast less demand, which, in turn, puts upward pressure on second-hand house prices.

To avoid that “it would help to have greater openness and more dialogue on the part of the municipal administrations, given that new build properties could help to decongest the most central districts of our cities and move pressure away from them towards peripheral neighbourhoods, whose expansion is being compromised by excessively slow decision making”, he added.

Original story: La Vanguardia

Translation: Carmel Drake

Land Shortages Curb Investors’ Return To RE Development

2 March 2016 – Expansión

CBRE, the Urban Land Institute and Esade gathered together representatives from several real estate groups yesterday in Barcelona; they all agreed about the lack of assets for sale in the market. Benson Elliot, Colonial, Merlin Properties, Vía Célere and Unibail Rodamco have suffered in the last two years from the avalanche of investors that have set their sights on Spanish real estate and have exacerbated the lack of assets on the market. The CEO of Unibail Rodamco in Spain, Simon Orchard, said that “we are forced to develop, because the type of product that is in demand does not exist”. The Director of Merlin Properties, Luis Lázaro agreed with him, “no warehouses have been constructed in Madrid for ten years, but the demand is there, which is leading us to construct turn-key projects”.

The CEO of Colonial, Carmina Ganyet, added that “the lack of quality products does not only relate to the location of buildings, it also manifests itself in terms of their features”, and as such, the group allocates around 20% of its investment to new construction projects, which also offer much higher returns, of 10% and 15%. The Head of Benson Elliott in Spain, Gregg Gilbert, said that his fund is looking for “this kind of return on all of its projects”. And the founder of Vía Célere, Juan Antonio Gómez Pintado, added that the biggest problem is the lack of land and “the government is lagging behind in this regard”.

Original story: Expansión (by M. A.)

Translation: Carmel Drake