Licences for Housing Increased in January

The once familiar cranes are returning to Spain
The once familiar cranes are returning to Spain

As I’ve been saying lately, the Spanish property market is recovering well from the tumultuous few years following the crisis and the number of building licences issued in January this year appears to back me up.

January saw an increase of 39.7%, when compared to January 2015, in the number of building licences issued with 4,774 authorised new constructions, according to data released by the Ministry of Public Works.

47.8% More Apartments

Of the total, 3,572 licences were issued for apartments within a block representing an increase of 47.8% over the same period last year. Licences for single-family homes increased by 20.3% with 1,201 new properties given the go-ahead.

This continues the upward trend that began in 2014, a year which saw the first positive signs following seven years of negativity, and culminating in 2015 with the number of licences up to 38,873, an increase of 1,.7%.

The Spanish property market suffered terribly after the 2007 crisis with 2013 marking a record-low in the number of construction licences approved, down to 34,288 units. This was less than a tenth of the 2006 peak of 865,561 licences, a collapse of 96%.


Spanish new construction activity on the rebound

Spain could again be among the countries of the European Union (EU) where the activity of construction could be on the rebound.

New construction in Spain rose in September

According to Eurostat statistics, this figure grew by 6.1% year on year in September and was surpassed only by Hungary, where construction activity climbed 9.3% , this figure was increased in the EU by 0.2% in September 2013 compared to the same month last year. Countries with the steepest declines in construction output on year were Portugal (-14.9%), Czech Republic (-11.8%), Slovenia (-7.9%) and Italy (-6 , 1%)

Construction Down 32.6% to May

New home construction still slowing
New home construction still slowing

During the first five months of 2012, the construction of 48,876 homes was completed in Spain. This figure represents a decrease of 32.6% over the same period in 2011 (72,606), according to data from the Ministry of Development gathered by Servimedia.

Of the total number of finished constructions, 98.5% (48,135) were allocated to private developers and 1.5% (741) to the Government. With respect to the first five months of 2011, the number of private developers’ constructions fell by 32.2% and those of public administration fell by 52.6%.

Of the constructions in the private sector, 28,988 of these homes were for commercial companies, with a year-on-year decrease of 42.1%, 13,801 were for individuals and communities of owners (-11.2%), and 3,501 were for cooperatives (-10.9%). In addition, there were completion certificates for 1,845 other private promoter works. The liquidation value of the physical execution of the works decreased by 21.3% to 6,156.3 million euros.

El Mundo reported that the number of dwellings completed in 2012 maintained the downward trend that marked the year 2011, when 167,914 homes were built, which was 34.7% less than the year before. The number of new builds in Spain have accumulated four consecutive years of declines. Since their peak recorded in 2007, with 641,419 new homes completed, the market has fallen by 74%.

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Why does the Spanish Stock Exchange Shrink?

This was written back in May but gives some good insights into Spain’s problems so I decided to post it for you.

Guest post by Adrian Espallargas

Spain entered in recession last month for the second time in three years. This country has been economically struggling since the 2008 financial crisis. The harsh austerity policies passed by the conservative government have not tackled the two main economy troubles of the country: The high unemployment rate and the very damaged financial sector. Therefore analysts are not very optimistic about the future of the Spain´s economy. In fact, the IMF expects the Spanish economy to shrink by 1.7% during this year.

Consequently, the Madrid Stock Exchange has continuously fallen since July 2011. Have a look at this graph.

IBEX Graph

However, some European countries economies have grown in the last two years or have recovered somehow after the 2008 financial crisis. For example Germany.

But why does the German economy increase while the Spanish hits the bottom? Let’s have a look at the companies that make up the DAX 30 and the IBEX 35 indexes in Frankfurt and Madrid Stock Exchanges respectively.

This is Germany
Among the 30 most important companies in Germany there are:

  • 10 Chemical, Technological, Medical or Pharmaceutical firms.
  • 4 Automotive Companies.
  • 2 Banks.
  • 2 Insurance Companies.
  • 2 Personal and Home Care manufactures.
  • 1 Steel Company.
  • 1 Cement Producer.

This is Spain
Among the 35 major Spanish companies there are:

  • Banks.
  • Construction and infrastructure corporations.
  • Steel companies.
  • Pharmaceutical.
  • petrochemical.
  • Solar Power company.
  • Wind Power company.

Germany has a large number of firms that manufacture diverse products. Automotive, Chemical, Technological, Medical, and Pharmaceutical industries are big job creators. Those businesses need from very low-skilled level workers to very-highly educated employees. In other words, from assemblers and transporters to scientist. Besides, the large scientific community in Germany assures the country  has very innovative top level firms.

The two main activities by the 35 major companies in Spain are banking services and construction. Precisely, the two industries most affected by the 2008 economic bubble.

Construction suddenly stopped after the bubble. This industry propelled Spain’s economic growth in the 2000s making around 10% of the GDP and employing 9% of the labor force in 2009. Construction is also a huge job creator that pushes other industries such as steel manufacturers. But Spain has over built infrastructures, buildings, and houses. In fact, Spain built more houses than Germany, Italy, and France together during the bubble. There is nothing else to be constructed. Therefore, one of the largest industries has halted its economic activity triggering massive layoffs. Now, unemployment is at pre-housing bubble levels (1994-1996). The jobless rate had decreased but once the bubble exploded, we see that Spaniards are at the same situation as when it started.

Found at

On the other hand, Spain has a crippled financial sector. Banks have accumulated numerous toxic assets from unpaid mortgages. Instead of depreciating the value of those properties to the current market prices, Spanish banks keep reporting in their balance sheets that the value of those assets is the price paid before the economic crisis in order to avoid reporting loses. But those prices are not fixed to the current. Consequently, nobody will invest in real estate keeping those toxic assets in stock having banks full of properties but short of liquidity.

Therefore, banks are not lending money. Despite the fact that the Spanish government bailed-out many of the cajas (savings banks), banks have used that money to pay the debts they had with other institutions instead of injecting money into the economy. Thus, there is no credit for individuals or companies. There is no fuel to start the engine.

Therefore, having the two main industries severely damaged has left the economy stagnant. Unlike Germany, there are no other industries that can carry the economy into a better scenario. The main problem of Spain is Spain itself. Until this country invests in different industries, unemployment will be an endemic disease in this nation.

This article was written by Adrian Espallargas, who has a blog all about the recession in Spain – and can be found on twitter @storyofacrisis

Construction of new homes slowing

New home construction still slow
New home construction still slow

According to data released by the Ministry of Public Works the number of new homes completed in the first quarter of the year stood at 30,151, representing a decrease of 31.4%, compared to the same period in 2011.

Private developers accounted for 29,630 of the total, or 98.2%, with the government making up the difference.

Of the private constructions 18,617 were commercial properties showing an interannual decrease f 41.1%. Individuals and communities accounted for 8,005 constructions, down 3.4% on the year. Cooperatives accounted for 2,068, a 10.1% increase and there were also 940 completion certificates granted for other private promoter works.

The liquidation value of the execution of these constructions fell by 18.4% to 3,766 million euros.

Spain has recorded four consecutive years of decline in property construction. Since the peak in 2007 figures show a cumulative fall of 74%. In 2007 there were 641,419 new properties completed, compared to 167,914 in 2011.

Property in Spain to recover in 2013

According to the latest Real Estate Pulsometer, released by the Corporate Practice Institute (IPE), new constructions will begin to rise in 2013.

They also predict that Spain’s stock of unsold properties will be reduced by 23.6% this year, representing up to 611,250 homes.

The report also pointed to a growing trend in buying homes for cash and they predict the number of new mortgages taken this year will be 60% fewer than in 2006.

El Mundo reported that it was demand for property from non-residents that was key to enable the sectors recovery.

“To liquidate the ‘stock’ in the shortest time possible it is crucial and strategic to restore the confidence and legal security, in commercial and urban developments, with the European markets, especially the English, German and Scandinavian, providing the greatest possible transparency in public-private collaboration,” the report said.

The report also stressed that construction is currently at a level 80% below that of the peak in 2007.

Construction declines in Spain


According to new figures released by Eurostat, construction declined across the euro area by 0.8% in January this year, compared with December 2011. Furthermore, across the 27 EU member states construction fell by 4.1%.

Spain recorded the third greatest fall with a decline of 11.5%, just behind Portugal with 11.9%, and Slovenia with a 19.7% decline.

Monthly comparison

Compared to December 2011, construction output fell in January 2012  in seven member states and rose in eight. The largest decreases were registered in the Czech Republic (-20.1%), the United Kingdom (-13.8%) and Italy (-7.8%), and the highest increases in Slovenia (+17.4%), Germany (+4.3%) and Portugal (+2.5%).

Building construction dropped by 1.5% in the euro area and by 4.6% in the EU27, after -0.3% and -3.3% respectively in December 2011. Civil engineering rose by 1.6% in the euro area, but fell by 2.2% in the EU27, after -3.9% and -3.5% respectively in the previous month.

Annual comparison

Compared to January 2011, construction output fell in nine and rose in six member states in January 2012. The largest decreases were registered in Slovenia (-19.7%), Portugal (-11.9%) and Spain (-11.5%), and the highest increases in Poland (+34.2%), Romania (+14.9%) and Sweden (+7.3%).

Building construction declined by 0.9% in the euro area and by 0.8% in the EU27, after +9.4% and +7.3% respectively in December 2011. Civil engineering decreased by 1.7% in the euro area and by 1.4% in the EU27, after +9.1% and +12.4% respectively in the previous month.

The production index in construction approximates the evolution of output within the sector, broken down into building construction and civil engineering. For the Member States which produce the construction index, but do not provide data for the reference period, Eurostat estimates missing values in order to calculate euro area and EU aggregates.

You can see the full report here: Construction Output Down by 0.8% in euro area

New construction falls 35%

construction in spain
Many constructions remain unfinished

In the first nine months of 2011 there were 127,207 newly constructed properties in Spain, representing a decrease of 35.2% over the same period last year (196,492), according to the Ministry of Development.

Of all the properties completed between January and September, 98% (124,731) were constructed by private developers and 2% (2,476) were government projects. With respect to the same months of 2010 construction by private developers dropped 35%, while publicly funded construction fell by 44.7%.

Among the private sector, corporations accounted for 86,259 properties showing a decrease of 41.6%, while private construction and communities accounted for 28,126 (-16.8%), and 6,154 (-6.4%) from cooperatives. The remaining 4,192 consists of other types of private development.

Meanwhile, the value of completed properties fell by 31.6% to 12,185.6 million euros. The finished house prices continue to follow the downward trend of recent years. In the whole of 2010 total constructions amounted to 257,443 which showed a 33% decrease from 2009.

Spain has now seen three consecutive years of falling prices. Since the peak recorded in 2007, when 641,419 new apartments were completed, the market has fallen by 60%.

Property bubble increased unemployment

spain construction industry
Half of Spain's construction jobs have gone

Before the property bubble burst in 2007 almost 14% of the Spanish workforce were employed in the construction industry.

Pre 2007 the industry provided 2.8 million jobs, 13.5% of the total Spanish workforce. Post 2007 over half of those jobs have been lost bringing the total number of construction employees down to 1.4 million, or 7.8% of the workforce.

Losing half the jobs in a single industry has a huge affect on the economy as a whole. New constructions have all but disappeared and, with an extra 1.4 million workers unemployed the new government are likely to struggle to keep up with the growing benefits bill.

The construction industry of course depends on the demand for property and with the current demand being so low, and with such low investment in the industry, the situation is not likely to change too soon.

Since the bubble burst house prices across Spain have fallen by around 30%, a huge drop. Despite low prices and record tourist numbers the industry is still slow and, in my opinion, is not likely to improve this year. Some agents did report a slight increase in sales in the second and third quarter of this year showing some signs of recovery but this seems to have been short lived and numbers have dropped once more.

I can’t see any real changes coming until the Euro zone is a little stronger and that is not likely to happen in 2011. Uncertainty in Europe is keeping investors away meaning prices may fall a little further. If confidence doesn’t return soon the market is in danger of collapsing completely.