March 5, 2021

Home construction falls by 25% and complicates the price reduction



Housing was the absolute protagonist of the previous economic crisis. The former Minister of Development himself Pepe Blanco He publicly pointed out the real estate sector in 2011, when he assured that he had incited banks, the Administration and Spanish society itself to live “beyond their means.” Some “excesses” that generated a credit bubble which ended up bringing down the economy. Now, with tourism bleeding out and house prices reasonably stable, no one looks at housing. But that doesn’t mean I’m not suffering the blow of the pandemic.

The main drop has been in the number of new construction visas, which this year will register a decrease close to 25%, up to 80,000 new visas, according to the promoters’ forecasts. They are minimal since 2017. Visas plummeted with the arrival of the previous crisis to begin, as of 2015, a progressive and slow increase. Thus, Spain surpassed the psychological barrier of 100,000 visas two years ago. Some levels that will not return, at least, for another two years.

60% pre-sales

The general director of the Association of Real Estate Developers of Madrid (Asprima), Daniel Cuervo, considers that this fall is explained by two reasons. On the one hand, the pandemic has caused “greater uncertainty” in the demand for housing that has not yet been cleared up and that has affected the application for new visas. According to the latest data published by the INE, the sales registered in October a fall of 13%, thus expanding the decreases produced in previous months. As in the rest of the economic indicators, the improvement in home sales in the summer was only an impasse within the crisis.

In addition, Cuervo adds another factor: the “tightening of financial conditions as a result of the crisis.” The CEO of Neinor Homes, Borja García-Egotxeaga, abounds in this aspect by stating in statements to this newspaper that “certain entities are demanding pre-sales of 60% of the promotion to grant financing, when levels close to 30% were previously claimed.” “If you work with cheap land and have made fewer contributions, banks ask for more pre-sales”, explains the manager.

To all this must be added the Administration delays in granting licenses, a problem that already existed before the pandemic and that has been aggravated by the impact of the coronavirus. From Neinor they explain that “the months of confinement have taken a toll, because in most cases these processes are not yet digitized, which has blocked the entire process.”

The sector hopes to recover part of the ground lost next year and reach the 95,000 visas in 2021. In other words, the pre-crisis levels would not be reached at least until 2022. “A recovery is foreseeable in the second half of next year, once a high percentage of the population has been vaccinated and confidence in the economy regained,” explains Cuervo.

Hopes of recovering demand, however, lie more with investors than with individuals. Because while the ordinary consumer will have to deal with the hangover of the crisis next year, the investor will find an interesting asset in the home to obtain positive returns in a market marked by low rates.

“Some launches have been postponed and will probably be resumed in a couple of months. But it is true that there is great uncertainty in the market, because when the health crisis is overcome, it will be necessary to face a very important economic crisis. Many clients have been put into mode ERE although they have not yet lost their jobs, which has an impact on the market, “adds the CEO of Neinor Homes.

He construction slowdown It will not only have consequences for developers, but, depending on the sector, it will also affect the price of housing in the coming years. Real estate companies consider that purchase and rental prices have grown strongly in large cities because the demand boom has not been responded to with an increase in supply.

The Government itself, now immersed in the development of the state housing law that will put an end to rent increases, recognizes that it is necessary toExpand the stock of apartments for social rent, and for that reason it has launched the 20,000 plan, which aims to build 20,000 homes in stressed areas. In fact, the Ministry of Transport, Mobility and Urban Agenda it is talking with several municipalities to co-finance these projects.

Since these houses usually take a few years to build, the delays produced during this year and next year will have a great impact on the housing supply in 2022. A year in which, in principle, the worst of the crisis will be behind us and the demand for housing will once again grow strongly.

“The projects planned for development in 2020 have been paralyzed by Covid-19, which will mean a reduction in the supply of new construction in the medium term,” explained the consultancy CBRE in a recently published report.

Real estate companies believe that the fact that the supply of new housing stagnates over the next few years will have an impact on prices, which will remain stable. Second-hand housing, on the other hand, will register more pronounced declines in the coming months, since although the owners have endured for the moment without reducing their homes, the complex economic situation that is coming leads to discounts. The portal It has already estimated that next year there may be discounts of up to 5% in the big cities in this specific segment.

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