Spain building sector slowly recovering

Spain building sector slowly recovering

Spain building sector slowly recovering

Spain’s property sector has emerged from the doldrums in the last year as foreign investors have flocked to buy prime assets at attractive prices and this recovery has had a positive knock-on effect on the construction industry, once a symbol of the deep crisis which dogged Spain’s economy for the best part of five years.

New building projects are springing up across the country, particularly in coastal areas, where prices took the worst beating when a massive property bubble burst in 2008. Scaffolding and safety netting is once again going up at previously abandoned building sites and Madrid is adding to this momentum.

A slew of developers have embarked on new housing projects and their product is being snapped up despite the glut of unsold property still to be found in the capital. Between 2007 and 2013, property prices fell by nearly 40 percent. More than 3 million houses and apartments sit empty, according to official figures but the construction revival is good for Spain’s economy, not least because it will create new jobs over the coming months and help cut the country’s high unemployment rate.

 

DEVELOPERS BENEFIT FROM CRISIS

Every cloud has a silver lining and Madrid real estate developers like Pryconsa and cooperatives manager Domo have benefited from the local government’s need to sell off land and buildings to raise cash. Domo recently won a bid for land owned by the Ministry of Defence. It paid 111.05 million euros for the plot located in the heart of Madrid’s financial district, where it plans to build 355 new homes. According to Domo, about 90 percent of the product is already reserved.

The big attraction for buyers is the price – Domo’s new houses will cost around 3,400 euros per square metre. This compares with prices of about 4,400 euros per built square metre in the same area a year ago. Spain’s civil service has other real estate assets on sale, providing an opportunity for the construction of thousands of new homes in central Madrid.

 

INVESTORS BACK SPAIN BUILDERS

The revival in Spain’s construction business will come as no surprise to Microsoft co-founder Bill Gates or billionaire George Soros, both of whom bought stakes in infrastructure firm FCC over the last year. As the Spanish economy returns to growth, investors like these have identified such companies as good plays on the country’s recovery.

So is the uptick in construction activity likely to continue and once again become a GDP growth driver? According to Eurostat data released in August, Spain’s building trade was the fastest-growing in Europe, posting growth of 42.4 percent since May 2013. While the pace of new home building is unlikely to reach levels of the boom years of 2004 and 2005, it looks like the construction sector is back in business!

For information on investing in Spain, contact corporate law firm Argali Abogados.

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