4 January 2017 – Expansión
Moreover, loans to build new homes have grown by 37%, despite the tightening of controls by the banks.
A decade later, the cranes are back on the skyline of Spain’s major cities once again. The economic improvement and return of credit to the property sector boosted the construction of new homes by 17% in 2016, according to the construction permit statistics published by the Ministry of Development.
The growth was driven by a 37% increase in the financing granted to construction companies and property developers, which received €1,025 million between January and October, according to the General College of Notaries. The banks have now digested the majority of the toxic assets left over from the bubble and are opening the credit tap to the construction sector once again, albeit including more restrictions and controls to avoid repeating the errors of the past.
On the one hand, in most cases, financial institutions are demanding that 80% of developments are pre-sold before the construction of any new buildings can begin. Moreover, the banks are requiring project monitoring to audit the execution of the work and, in the same sense, a more detailed control of the clients that choose to buy properties.
With the money loaned by the banks, property developers and cooperatives have started to design buildings aimed at capturing the demand for new homes that exists in the market. “Clients believe that the worst of the crisis is over and that prices are not going to decrease any further. Moreover, financing conditions for buyers are unique given the low level of Euribor”, explains Daniel Cuevo, Chairman of the Association of Property Developers in Madrid (Asprima).
But the doors to the new real estate market have not been opened to everyone. Most of the new homes sold are “reposition” properties, in other words, they are properties that replace homes that have become too old or too small for their occupants. Young people are finding it the hardest to form their own homes, due to the high rate of youth unemployment, the level of wages and the instability in the market. (…).
In total, during the first ten months of 2016, 16,043 permits were requested to build new homes. The sector expects to reach the 20,000 permit threshold by the end of the year, a figure that exceeds the number of permits requested in 2015 by 17%, but which is still well below the 113,000 permits requested in 2006, a record year, at the height of the real estate bubble. (…).
On the other hand, the new homes that are being built post-crisis are not the same as those that were built during the boom years. Now, property developers are designing buildings with three-bedroom homes that cost the same as a two-bedroom home back in 2006. Urbanisations, which become so fashionable at the beginning of the century, are also back in demand. “People want homes with padel courts and a swimming pool, plus they now also want specific spaces to celebrate parties for children and adults”, explains the President of Asprima. In total, the Ministry of Development granted 1,175 permits to build urbanisations in Spain during the ten months to October 2016.
The increase in property construction has been accompanied by more transactions involving land. The number of land purchases by companies recorded an average growth rate of 23% during the nine months to September 2016, across the country as a whole. In certain regions, such as Madrid, the increase during the first three quarters of the year amounted to 135%. (…).
The improvement in new build construction work also extended to renovations. Thousands of households took advantage of the economic recovery to undertake home improvements and even to extend their properties. Thus, during the first 10 months of 2016, 21,801 requests were filed to renovate or restore homes, up by 2.1% compared to a year earlier. Meanwhile, demand for permits to extend homes soared by 39%, to 1,634. (…).
Original story: Expansión (by Victor Martínez)
Translation: Carmel Drake