Property Market Upturn

The past few years have been barren for the Spanish construction industry, estimate numbers vary, but anywhere between 300,000 and 800,00 unsold new homes stand empty across Spain since the downturn in 2008. But as the economy and real estate market pick up a pace, Spain’s construction sector has begun building new housing and commercial properties at a pace not seen since the downturn began in 2007. During the height of the economic boom, the construction industry accounted for more that 10% of Spain’s GDP and although fallen now to 5% analysis have stated publically that the building sector is growing. Investment in house-building has registered its first quarterly increase between the second and third quarters of 2014 – the first time this has happened since 2008.

With large foreign demand largely focused on the popular resorts of the Costa del Sol re-sale properties tend to be more in demand in these areas. However, Spanish buyers are returning to the market, attracted by lower prices and greater employment and economic prospects on the up-turn. But lending has become stricter, as more and more banks have begun to release funds for mortgages and development projects. Altogether Spain’s banks owe more than 161 billion Euros in homebuilder debt and thousands of distressed and unsold properties. The rules insist that over half of the properties that the developer intends to build have to be sold, before the bank will agree to finance the project. The developers have to buy the land privately and inject 50% of their own capitol into building costs. Essentially, the banks say that new building projects cannot put the wider economy at risk as it did in the past.

Tighter regulations are good news for the Spanish property industry. It means that a more stable market condition exist on resale properties, easing pressure on prices and creating the right conditions for supply and demand.We also see that the banks are loosening their belts on mortgage lending, which is setting the wheels of the resale property market turning. Although figures from Reuters show that approvals for mortgages are less than one tenth of 127,233 that were approved in 2006, but numbers are on the rise. Joan Bertran,

Head of Estate Investment at Banco Sabadell said “It’s about a return to normal activity, it’s not a boom. The market has been paralysed for seven years and now there is a backlog of demand.”


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