The lack of new build homes makes a guaranteed investment out of it.
The production of new build homes is still at very low levels compared to the demand from the families. In fact, currently in Spain there are only 10 new properties per every 1000 inhabitants. Since 2007, the construction of property in Spain has been on hold. Back then 856.561 properties were built in a year, number that went down to 35.000 in just a year according to the Ministry of Development.
Until September of 2016 47.837 licenses were granted, a 32,2% more than the same period in 2015. The number of licenses until December is still unknown, but it is estimated to surpass 60.000 units.
Economic growth and the return of mortgage credit have encouraged the real estate market to build 17% more in 2016. Construction companies are starting to have more financial help (37%), achieving 1.025 millions of Euros between January and October.
Experts assure that in Spain over 150.000 units of new build homes are needed and only 46.000 have been constructed at this time.
High demand vs Low offer increases the prices
But despite of the licenses granted, the number of properties that are actually made reduces. In fact between January and September of 2016 only 29.230 properties in Spain were actually built. This generates a 13,7% fall compared to the same period in 2015. Since April 2016, the construction of new build home registered growth if we take into account the annual rate but in May the tendency changed into negative numbers. The main issue is the lack of ground to build property and also the delay to receive the proper licenses.
Financial entities ask constructors that 80% of the commercial promotion should begin before the beginning of the construction in order to have a better control of the properties that will be immediately sold.
Since 2007, when the numbers of new build finished homes were on top with over 595.000 properties, the numbers went down 93% until the end of 2015 with only 39.891 properties built.
The need of ground to build is urgent
Only one of every ten properties that are sold in Spain are new build homes. In big cities such as Madrid or Barcelona, the situation is even worse, the ground is really limited and the demand is extremely high. This is why most of the properties sold are second-hand since new build homes barely exist and the prices are constantly rising due to the high demand.
According to Knight Frank construction’s last report: Madrid, Malaga, Barcelona, Vasque Country and Balearic Islands will lead the production of new property in the following years. Their director claims “We trust that new build home production will help us in the following years to stabilize the market”
Only in Madrid second-hand transactions made during last year have increased 40%. The need of ground to build is imminent, since in Madrid there are only 7 properties available for every thousand inhabitants. The data shows that allocating part of the savings to buy a property is the best option to make money profitable.
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