As House Sales Rise & Stocks Fall, Should We Build More Homes?

3 June 2016 – Idealista

In 2016, the number of house sales is forecast to rise by 10% to 440,000 operations, almost 40,000 more than last year. This increase in the volume of transactions is also expected to result in a 25% reduction in the stock of unsold new homes, without exerting excessive pressure on house prices, which are predicted to rise by 3.8%. That is the outlook described by Servihabitat for the next few months. (…).

In this vein, the number of unsold new homes has been gradually decreasing in recent years. According to Servihabitat, the stock will decrease by 125,000 properties during 2016, to 367,500, which represents a decrease of 25% compared with 2015. By contrast, construction of 44,600 homes will be started this year and another 50,800 residential properties will be finished.

The statistics have opened a debate over whether the rate of residential construction should be increased or not. Like everything in this life, it depends. The post-crisis real estate market is moving at double speed and, whilst in some places everything that is being built is being sold; in other areas, there is barely any demand and there is a huge stock of homes constructed during the boom years, for which there are no buyers.

“The reduction in stock is not uniform across the country. The major cities have experienced a gradual reduction in the number of homes up for sale to reach the so-called technical stock”, explained Juan Carlos Álvarez, Director General of the Real Estate Business at Servihabitat.

That means that in the autonomous regions of Madrid and Cataluña, the difference between finished homes and new homes sold amounts to a balanced figure of 1,000 units. The forecasts show that the stock of new homes in Madrid will decrease by 64.2% this year, to 4,792 homes. In the case of Cataluña, the reduction will amount to 23.3%, leaving 10,553 recently constructed homes.

There is little doubt that in certain areas of the major capitals, everything that is being built is being sold. “Nevertheless, that is not happening in the metropolitan areas or peripheral towns. There is still an abundant stock in some areas that will be difficult to get rid of, given that current and potential demand is not looking for new homes in those areas”, says Álvarez.

For that reason, we need to differentiate between pre-crisis stock – which is generally poorly located, has little demand and is very difficult to sell – and the post-crisis stock, which is better placed and has better sales prospects. (…).

The problem of uncertainty

Although the data is positive and, according to Julián Cabanillas, “the current political uncertainty is not affecting the sector”, the CEO of Servihabitat identifies a problem that may weigh down on the good performance of the real estate market, “which is the sensitivity to the legal uncertainty that results from the lack of homogeneity in decision making by local and regional governments, which affects investors’ interest in real estate. (…).

Sources in the sector say that since the new government arrived in the Town Hall of Madrid, the time it takes to obtain the necessary permits to begin construction of housing developments has doubled “from four months to eight”, which represents a huge cost for property developers and which inevitably impacts the final price of homes.

Servihabitat is calling for the different authorities to employ “greater balance in the protection of the rights and duties of all agents in the market and a greater balance in terms of decision making”.

Original story: Idealista (by David Marrero)

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