Crisis in the Spanish Construction Industry?

There has been much controversy since the beginning of the year, over the decline in the housing market in Spain, created by the continued instability of the economy. However, this has continued to beg the question, “So why do they keep on building?” A recent report conducted by the Association of Spanish Developers (APCE) suggested that the Construction industry may not be in such dire needs as feared. Its investigations have revealed that the vast majority of the 1.7 million properties built over the last three years are already sold. The announcement has come amid claims that over 1.2 million newly- built properties in Spain continue to stand unsold.

Allegations have also been made that construction of some 800,000 homes continues to commence every year, exacerbating the existing problem, and needlessly defacing the little area of undeveloped coastline which remains. The Valencia, Almeria and Andalucian Regions are said to be the worst affected. Where these new properties remain unsold, constructors are allegedly abandoning projects until further investment will allow the work to continue. The APCE report also disputes this notion saying that it is a completely unsupported exaggeration, and that these figures relate to initial planning approvals, a high proportion of which are never initiated.

Comparatively, the Spanish Housing Ministry’s figures reveal that 665,000 new properties were started last year, while only 597,600 have reached completion. The PSOE political party has undoubtedly highlighted this problem in the Orihuela Costa area, where the construction of over 25 new urbanizations has been started and remains unfinished and deserted after several months. This has affected hundreds of people, the majority of whom are British investors who now wonder if they will ever see their Spanish dream come to fruition. Foreign investment in Spain hit its peak during 2003, when a staggering 2.925 billion euros was ploughed into the Spanish property market from overseas investors.

Although fluctuations have been witnessed since, figures have remained continually high in relation to other parts of Europe. Figures from the Royal Bank of Spain continued to register an increase in foreign investment in Spanish property of 19.2 per cent during the first 5 months of 2007. By May, a total of 2.252 billion euros had already been invested, which is almost equal to that of 2005, and almost double the figure for the same period in 2006. Interestingly, the amount of money which Spanish nationals invested in properties outside of Spain had also doubled during the same period.

This is all relatively confusing, as concerned reports from those working within the housing sector continue to denounce a downward trend, with the proclaimed instability of the industry heightening on a monthly basis. So is the industry at crisis point, or is it all just a myth? A possible explanation for the seemingly positive figures might be that those sales witnessed during the busier periods of 2004 and 2005 are only just reaching completion, so that the exchange of monies is now being officially recorded - it is not until contracts are officially exchanged before the notary that the investment is logged among national investment figures.

However, it would still seem that recent damning reports have yet to deter foreigners from selecting Spain as the country where they would most like to spend their future. According to a recent study, 78 per cent of Brits claimed that if they were to relocate overseas, sunny Spain would be their preferred destination. Further statistics formulated by the end of the year should confirm whether foreign demand is back on the increase, or if the figures are merely as a result of the successes of previous years.

Story from Round Town News

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