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

IPE: House Prices Will Rise By 5% In 2016

18 July 2016 – Expansión

The recovery of the real estate sector began in 2015, and we are now (in 2016) seeing the consolidation of the end of the crisis, with increases in: property prices, the number of transactions, the number of housing permits and rentals, spreading across the whole country.

After seven years of crisis in the sector, the improvement in 2015 might have seemed like a mirage to many, a temporary bounce or a small sign of stabilisation. Nevertheless, the figures for 2016 are showing that the outlook is strong and that the housing market still has great potential, which means that we no longer need to talk about “blossom in the greenhouse” or an incipient recovery, but rather future growth.

The scenario outlined by the Institute of Business Practice (IPE) in its next edition of the Real Estate Pulsometer, shows a very favourable outlook for the sector, in which average transaction prices will grow by 5% and the volume of sales will increase by 13.9% with respect to 2015. All of this will act as a driver for the rest of the sector, which is also being boosted by construction activity. Thus, the number of projects launched will increase by 9.3% and the number of permits for new homes will grow by 13.9%. It seems that the sun is already shining on all of the major indicators in the real estate market.

In addition to this data, we are seeing a gradual and increasingly rapid recovery of the rental market; a strong increase in the yield on homes; and a clear recovery in the non-residential sector, which set record breaking figures in 2015 and is following a positive trend so far in 2016, with fewer operations, but higher prices.

The indicator that best indicates the recovery of the real estate sector is the number of transactions, which grew by 11.1% in 2015 and which is forecast to rise by 13.9% this year. In addition, the increase in sales does not depend only on purchases by those with significant savings…, which was the main driver of the market in years gone by, but in very specific areas.

More mortgages

During 2016, the opening up of the bank loan tap will drive mortgages up by 10.5% (compared with a miniscule increase of 0.6% in 2015), which will allow buyers to return to the market in search of primary residences, even if they only have small amounts of savings. This means that the improvement in the market will extend to other provinces and neighbourhoods that have not featured on the radars of investors in the past.

In addition, this recovery will also affect plots of land, as well as garages, offices and storerooms, to reach 787,839 operations (up by 10.2%) compared with last year. In total, more than half of these transactions are expected to involve homes.

Based on the data to May, the highest increases in house sales are being seen in the Balearic Islands (where purchases grew by 38.6% between January and May, with respect to the same period last year), followed by Murcia (28.9%), País Vasco (24.3%) and Extremadura (21.7%), according to INE. Nevertheless, the Institute of Business Practice forecasts that, during the year, Madrid, Cataluña, Valencia and the Canary Islands will also see some of the most significant increases. (…).

Original story: Expansión (by Pablo Cerezal)

Translation: Carmel Drake

Outlook 2016: House Prices Will Rise By 7% & Sales By 17%

28 December 2015 – Expansión

(…). According to the XXII edition of the Real Estate Pulsometer published by the Institute of Business Practice (IPE), the outlook for 2016 is promising. Next year, house prices will rise strongly (by 6.6%), sales will increase by 17.2%, construction of new homes will rise by 12.2%, mortgage lending for urban properties will increase by 16% and stock will decrease by 24.7%.

In addition, the report forecasts a gradual recovery in the rental market, a sharp increase in yields on housing and a full-blown recovery in the non-residential sector, which has broken records in 2015 and on course for a positive 2016, with fewer operations but higher prices.

The most tangible indicator of the real estate recovery will be “the increase in the sales of homes, offices, warehouses, retail premises and land (especially urban)”, says José Antonio Pérez, Director of the Real Estate Department at IPE and the author of the report. (…). We expect to see around 820,000 operations closed in total in Spain in 2016, which represents an increase of 8.1% with respect to  2015 and 23.7% more than in 2014.

Increases across all regions

More than half of the properties sold will be homes. Specifically, next year, 481,500 homes will be sold, i.e. 17.2% more than in 2015 and 50.7% more than in 2014, according to the study, prepared using data from the MAR Real Estate network of estate agents and the Network of Qualified Real Estate Advisors, cross-checked against official figures from INE, the Ministry of Development, the registries and the notaries.

Sales are expected to grow by the most in País Vasco (by 26.8%) in 2016, followed by the Balearic Islands (24.5%), Madrid (23.5%) and Cataluña (22%). Only Castilla-La Mancha is expected to experience a decrease next year: operations will decrease by 2.4% in that region, which has the highest volume of stock per capita in Spain.

In other words, the recovery will continue to take place at two speeds, but the differences (between the speeds) will be less marked, in the sense that, although we will see different speeds, improvements will be seen across almost all of Spain.

In the context of more transactions and increased mortgage lending, house prices will increase significantly. On average, by 6.6%. If we also take into account non-residential assets, property prices will increase by 8.17%, on average.

The market for new builds will also be affected. According to the Pulsometer, cranes will return to our cities, albeit gradually. Specifically, construction permits (which indicate future construction activity) will increase from 58,636 in 2014 to 82,682 in 2016. Up by 41% in two years (in 2015, they already increased by 9% YoY). Moreover, construction will begin on 39,000 residential properties in 2016, up by 12.2% compared with 2015 (34,700). (…).

The changes will also help to reduce the stock of unsold new properties. This surplus amounts to 433,583 homes at the end of 2015. In 2016, a quarter of that supply will be used up, taking it down to 326,295 units. That figure represents less than half the number in 2014 (675,945), according to the IPE’s study.

More mortgages

The real driver behind this consolidation in the residential market is financing. Mortgage lending for urban properties (in other words, not only homes, since the report does not break down non-residential financing) will amount to 426,647 (individual mortgages) in 2015, up by 23% compared with 2014. The figure for 2016 will increase again to 494,890, i.e. 16% more than this year. (…). The average mortgage in 2016 (€122,500) will be higher than since 2011 (€124,862). (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

The Stock Of New Homes Will Fall By 29% In 2015

9 February 2015 – Expansión

The over-supply of properties is decreasing / The number of unsold new homes will decrease from 662,761 in 2014 to 469,700 in 2015.

The puncture in the paroxysm of greed that was the real estate bubble, left a never-ending mummified trail, a sea of properties strewn haphazardly across the country and without exception. In 2008, when the economy crashed, a squirrel could have crossed Spain from Tarifa to Cadaqués jumping from empty home to empty home. Not anymore. Or not through so many empty new homes at least. The stock of new residential property for sale is decreasing significantly, although in absolute terms the number is still high.

That is the view of the 21st Edition of the Real Estate Heart Rate Monitor (XXI edición del Pulsímetro Inmobiliario) published by the Institute of Business Practices (el Instituto de Práctica Empresarial or IPE). The surplus of homes declined in 2014, for the fourth consecutive year, from 777,000 in 2013 to 662,761. In other words, by approx. 115,000 homes or 14.7% of the total.

Furthermore, the decrease will be even greater in 2015. According to the IPE’s forecasts, the figure will drop down to 469,708 residential properties this year, i.e. 29.7% fewer than in 2014. In other words, almost one third of the stock will have vanished in just 12 months. As many as 193,000 homes.

The over-supply of homes reached its peak in 2010, when the developments that had been started in 2008 were completed – residential construction is a process that tends to take around two years. In 2010, the surplus stock amounted to 931,615 homes, slightly less than twice the number of new, empty homes that will be on the market in 10 months time in Spain (note, stock does not include second-hand homes).

Once again in 2014, Valencia was the autonomous region with the highest number of phantom residential properties and the only one to have more than 100,000. This region, which is heavily influenced by coastal second homes, closed 2014 with a stock of 163,098 units, which will decrease by 27.5% in 2015, down to 118,196, according to the forecasts released by MAR Real Estate and the IPE. Valencia accounts for no less than one in four of all surplus properties, i.e. 25% of the total.

It is followed by Castilla-La Mancha, an unequivocal symbol of the legacy of the years of over-heating, which is expected to have 72,944 homes by December (2015), down 13.6% from a year earlier.

The third autonomous region is Andalucía, which is expected to have 59,563 empty homes by the end of the year, i.e. 41% fewer than in 2014 – not for nothing, the Costa del Sol is beginning to recover. These three regions alone account for 54% of the total stock.

Experts predict that the highest reductions in the over-supply of property will take place in the Community of Madrid and Cataluña, where they expect the figures to decrease by half, i.e. from 27,618 to 13,809 in the case of the former; and from 25,353 to 12,676 in the case of the latter.

New homes are already being built in Madrid and Barcelona because some areas have been left with very little stock”, says José Antonio Pérez, Director of Real Estate at IPE. However, there are other provinces, especially those in the East “with a large quantity of homes that are going to be hard to sell”, due to the vast number of properties that are suffering from a double hangover: that of the bubble and that of the nearby sea”.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake