The economic slowdown caused by The Covid is also passing a severe bill to the construction of housing in Spain. The brick business has folded sails in the face of the crisis. Ravaged by the excesses of the past, home developers have been cautious for years. And that prudence it has led them to stop short a large part of the promotions that were about to start or even underway. The stoppage caused by the state of alarm was later joined by the decision of investors to wait for the economic outlook to clarify rather than build houses that later cost them to sell.
The slowdown in residential work in Spain has been resounding and has returned the sector to activity levels of three years ago. The number of homes started between January and August has been 29% lower than the same period last year. In absolute figures, construction began in Spain until August 21,264 fewer homes than in the first eight months of 2019.
This 29% collapse is even more relevant when compared to the continuous increases that had accumulated since 2013. That year the crisis that had battered the sector since 2007, when it broke out, hit bottom. the “housing bubble” and housing development was forced to purge its excesses.
In Spain, much more housing had been built than was needed. When the “bubble” burst, it left a huge stock of homes and swept away a large part of the development companies, devastated by the financial earthquake.
Of those excesses it gives an idea that, in the three-year period 2005-2007, on average, each year 750,000 houses were built. That figure contrasts with the around 100,000 that were promoted in 2018 and the 106,000 in 2019. It is not that few are promoted now, it is that in the years of the “boom” crazy figures were reached, in the heat of a speculation that became devastating.
After that “bubble” disaster, housing development froze in Spain. It fell sharply to testimonial figures. In 2012 the ground was hit, with only 34,288 homes started that year. Since then, mainly since 2015, residential construction began to climb clearly, but without skyrocketing. There was still an abundant housing stock pending to be digested by the market. And the promoters chose to be conservative, in no case risk exceeding the figures that can be assumed by the demand.
The 100,000 threshold
In 2018 and 2019, after the increases in previous years, the sector stabilized between 100,000 and 110,000 new homes started per year. A prudent figure, which is close to what experts currently consider to be the reasonable threshold, based on actual demand. But in those, the Covid arrived, and the disaster also infected the housing development.
After the obvious slowdown that it has caused in the sector, the question is whether this is a specific pothole that will come out soon, or if housing development is going to suffer for a long time.
The director of the Pisos.com study service, Ferrán Font, states that “It all depends on how the pandemic evolves during the new year”.
“The OECD predicts that Spain’s GDP will close 2020 with a fall of around 12%, which in 2021 will recover by 5%, and by 4% in 2022. That means that until 2023 we would not return to pre-Covid levels . And, with this scenario, it is foreseeable that housing development and sales will also gradually recover », indicates Font. “There will probably be no room for a full recovery during 2021” of the real estate activity, predicts this expert.
And, how far can housing development take off in Spain? What threshold is reasonable based on actual demand? “In recent years there have been around 100,000 homes started, far from the 150,000 that are considered necessary at the moment for the market to have an adequate housing stock in all segments and types,” says Font.
The most dynamic areas
In addition, it must be borne in mind that the market is very uneven according to areas. In some, the demand for housing continues to take off, but in others the comeback will be much more difficult, even apart from the pandemic.
“In general, the pothole that the Covid crisis has caused in housing development is a one-off phenomenon, and in a year, or a year and a half, we would expect the sector to return to the rates it had a year ago, before of the pandemic “, explains Fernando Rodriguez de Acuña, general director of RR de Acuña Asociados, a consultancy firm specializing in the real estate sector.
Although the crisis has triggered unemployment and this reduces demand, this expert indicates that the labor market “is going to recover in the medium term and, in addition, despite the uncertainty, there is still a lot of interest from investors and a lot of liquidity to invest in acquisition for rent ».
Taking into account all the variables, Fernando Rodríguez de Acuña points out that housing development is going to take off again, after this downturn, but “It will continue to focus especially on large metropolitan areas and consolidated coastal areas”, where the demand is most intense.
In his opinion, in general, “taking into account the housing needs and the existing housing stock, for the next decade the theoretical threshold for construction is between 150,000 and 200,000 homes started per year.” It is precisely the scenario towards which the sector itself was pointing, in view of how promotions had been increasing until the coronavirus arrived.
“Right now, the outlook is very uncertain, this paralyzes purchasing decisions, sales drop and also interest in buying, something that developers notice immediately and react by slowing down the pace of construction. But, as soon as the economy starts to slow down. rebound, interest will increase and promotion will move again, ”says Rodríguez de Acuña.
The employers of the sector, Seopan, is also confident of a progressive comeback in housing development. In fact, it stands out that a recovery was already noticed in September, after the collapse of the previous months. In annual computation, he estimates that 2020 will end with “A 19% drop” in new home development. This decline “is within reason and it could be estimated that visas, next year, will stabilize at a figure close to 90,000 per year, “they explain to ABC from Seopan.