13 February 2017 – El Confidencial
Land prices are soaring, house prices are rising, the buying frenzy is gaining momentum in some areas and in certain developments…Is history repeating itself? Are we witnessing the gestation of a new real estate bubble, albeit not on a national scale, but nevertheless in certain areas of the country. That is what seems to be happening in some neighbourhoods of Madrid. But, the answer, for the time being at least, seems unanimous: not yet.
Buildable land, in other words, land that is ready to be built upon, is running out and, across Spain, there is barely enough land left upon which to construct the 1.5 million homes estimated to be required to supply the market for the next 8.6 years. In Madrid, the land will run out in just over 6 years, according to the latest report from the appraisal company Tinsa. It identifies a worrying shortage of this type of land in areas of expansion to the north of Madrid, as well as in certain specific points of the metropolitan area, such as Pozuelo, Villanueva de la Cañada, Coslada and Rivas. In some of these areas, according to warnings from Tinsa, there will be no buildable land left within 12-24 months. This situation has, unsurprisingly, led to sharp increases in land prices in certain areas. And these rises are concerning the sector. Where are these first warning signs starting to sound?
The large real estate development in the north of Madrid, which was launched at the height of the crisis and which has fallen victim to numerous legal setbacks, has become, in the eyes of the residential sector, a clear example of the extent to which land can become a very sought-after, as well as a very dangerous, asset.
“Without doubt, it is one of the areas where land prices have grown significantly. In 2014, they ranged between €750/m2 and €900/m2, whereas nowadays operations are being closed for more than €1,200/m2 and €1,300/m2, and the perception in the market is that land can no longer be sold for less than €1,400/m2”, explained Vicente Quintanilla, Director of the department for Investment and Land at Foro Consultores. According to this expert, “this trend generates significant tension in terms of the prices of new builds, which are being sold for €3,000/m2 in certain developments”. (…).
Another market where prices have also risen significantly is the municipality of Pozuelo de Alarcón, where Sareb sold land for around €1,000/m2. (…).
Indeed, the supply of land in Pozuelo has completely run out and families in need of homes are heading to other markets, such as in Boadilla del Monte, a cheaper alternative. According to data from Foro Consultores, the gap in prices is very significant. “To give you an idea, a family home or chalet in Boadilla costs around €450,000 on average, compared with between €700,000 and €1 million in Pozuelo.
Scarce and sought-after plots of land have also seen sharp price increases in recent years. “In El Camino de Barrial, in Aravaca, land prices have risen from €1,200/m2 in 2014 to around €2,000/m2 now. (….).
Boadilla del Monte, at boiling point
Boadilla del Monte is another one of the markets that has experienced a huge boom over the last two years. And there, it has not been due to the scarcity of land, but rather because of the strong demand from families who, as described above, cannot find homes in Pozuelo de Alarcón.
“For family home plots, land prices have increased from €400-500/m2 in 2014 to €800-900/m2 in2016, say Foro Consultores. (…).
Euphoria in Méndez Álvaro and rises in El Cañaveral
In the heart of the capital, where land is noteworthy due to its absence, land prices have increased considerably. In 2014, buyers paid €1,000/m2 and in a recent operation, whereby Adif and Renfe sold a plot to Vía Célere, the price paid amounted to around €1,900/m2. (…).
This increase in land prices is not exclusive to the area to the north of Madrid (…). The price of more affordable land and cheaper homes has also risen significantly in recent months.
Such is the case of El Cañaveral, in the east of Madrid, where “last summer, land prices amounted to around €360-370/m2 and now plots are going for €450-500/m2” (…).
Finally, all of the experts lament the fact that during the crisis, no agreement was reached to manage land, which has resulted in this significant shortage and in the inevitable increase in prices. They advocate greater agility in terms of urban planning, especially where the shortage is leading to a bottleneck in the market.
Original story: El Confidencial (by E. Sanz)
Translation: Carmel Drake