Spanish constructors want more land to build on

In a congress organized by APD Spain’s main construction companies have said that the price of property could rise sharply within two years if more land is not made available for new buildings.

Fernando Martín, the president of Fadesa, complained that the procedures for making land available to build on could take up to six years in Spain when in other countries such as Morocco or Mexico it had been reduced to just one and a half years.

He also claimed that the price of new flats in Spain would not go down and interest rates would not rise any further in contrast with the predictions made by many experts.

Martin pointed out that since the local elections earlier this year no land had been processed for new construction. He said that the way that the law was being applied was prejudicing the construction industry in Spain.

Furthermore, the group of Spain’s main construction companies known as the G14 said that more land needed to be made available for new buildings because they only built the flats that people wanted to buy and insisted that the demand for new flats wouldn’t drop from between 450,000 and 500,000 per year.

Martín warned that employment levels could be affected if the disincentive to build new demand for new properties continued and that according to his figures the promotion of new property could drop by up to 60% as it did over the last six months.

Spanish building development continues despite no water license

Yesterday it was reported that a Spanish building promotor in Avila had begun demolishing forests and clearing land to carry out a massive building project without even having obtained a water license. This means that the construction company will be unable to guarentee water supply to possible property buyers.

Not only have an estimated 6700 trees been cut down in an ecologically sensitive area near Villanueva de Gómez (Ávila) in order to clear land for the construction work but the construction company in charge has no way of supplying the 7,500 homes it is planning to build with water because it has been denied a water license.

According to the article published in El País yesterday, despite the lack of license, the regional government of Castilla y León, run by the PP (Spain’s main opposition party), has given authorisation to the construction company to go ahead with building 3 golf courses (at a cost of a further 10,000 trees) ignoring technical reports that said the plans were absurd and without justification.

The local water authorities has revoked the water license on the grounds of the water table in this area being contaminated by arsenic. The present population of Villanueva de Gómez which number only 156 inhabitants is currently supplied with water by lorries and its inhabitants drink only bottled water. In June 2005, the construction company was awarded the rights to 771,363 cubic metres of water per year which was in addition to the 180,000 cubic metres that it already had which meant that the company had enough water to start work. However, it falls well short of the 2.5 million cubic metres of water required per year to supply the 22,000 inhabitants which could be living in ‘La Favera’ within a few years with water.

Furthermore, the area in question is important ecologically because it provides a habitat for a lot of wildlife including imperial eagles which are an endangered species in Spain. Because a building permit was granted to the previous owners of the land over 25 years ago ,the permission to build homes there was given without the need for an environmental survey although ecological groups such as SEO/Birdlife together with Comisiones Obreras insist that it is necessary. Large parts of the area have already been prepared for construction work with many zones already under tarmac and, according to environmental groups up to 10,000 trees have already been felled.

According to the article, the construction company intends to go ahead with its plans to build the homes and golf courses despite the lack of water and despite the looming housing market crisis in Spain.

Incentives to rent property in Spain

Spanish Government to offer new incentives to rent

The government is planning to introduce new measures to promote renting flats and houses.

Firstly the Public Agency for Renting Property (la Sociedad Pública de Alquiler - SPA) is to give tenants a special type of guarantee to offer landlords.

Secondly SPA is currently trying to get more properties onto the rental market by offering property owners with empty flats insurance against possible non payment of rent, damage to the property or legal costs if the owner needs to go to court to evict tenants. The cost of this insurance would be lower than if a landlord takes out their own private insurance.

Furthermore, this association is hoping to be able to provide thousands of properties, belonging to property investment groups such as banks, for rent. At present it is in negotiation with property investment groups regarding this issue. For example SPA has reached an agreement with Santander Bank which is going to offer 8000 properties for rent. Sabadell will also add a further 2000 properties to this figure. SPA also hopes to reach a similar agreement with BBVA.

Real Estate slow down in Spain puts Spanish savings banks at risk

American Agency Moody’s detects 5 Spanish savings banks at risk.

Financial analysts at Moody’s believe, like the Spanish government, that property prices in Spain will continue to rise slowly. However, the agency doesn’t rule out other possibilities such as a slight drop in prices in the Spanish property market. It believes that if this situation arises then Spanish banks, above all regional building societies which have lent a lot of money to construction firms, will be hit the hardest.

The American agency thinks that banks and savings banks are more at risk from construction firms defaulting on their payments than families who can’t pay their mortgages. With regards to those who fall behind on their rent the European Association of Arbitration has pointed out that if this occurs then it is almost always during the first few months of the rental contract being signed. Although, the most pessimistic forecast of a property crash occurring in Spain has been ruled out for now, a lot depends on macroeconomics and the healthy evolution of the world economy.

While the number of individuals and families who can’t keep up their mortgage repayments is still very low in Spain, the percentage of mortgage defaulters has been rising steadily. While in March it was just 0.462% this rose to 0.506% in June. This could be a cause for concern for savings banks who have granted loans to construction companies, given that the figure was under 0.3% just two and a half years ago. Moody's has identified 5 Spanish savings banks particularly at risk, although it has declined to name them.

Related: Spanish banks # Spanish savings banks # Ranking of Spanish banks