Housing starts down 40% as falling sales begin to hurt

13 December 2007

MADRID – Spanish property companies are coming to terms with the end of a massive boom, with housing starts well down on last year as sales fall and credit tightens.

Pedro Pérez, the secretary general of the so-called G-14 lobby, which groups together the 13 biggest real-estate companies in Spain, told reporters yesterday that housing starts since August are down 40 percent compared with the same period a year earlier.

On top of falling sales, the sector is also feeling the effects of the credit crunch sparked by the US subprime mortgage crisis of the past summer.

According to figures released earlier this week by the College of Property Registrars, sales of homes have dropped 30 percent since the summer, compared with a fall of 15 percent in the first half.

Pérez said he does not see any solution to the liquidity problem in the short term, but hastened to deflect any suggestion of a looming crisis in the sector.

According to a study carried out for the G-14 by Spanish research group Analistas Financieros Internacionales, some 490,000 housing starts are expected next year, compared with 600,000 last year.

Pérez said the adjustment on the supply side was in line with forecasts of annual demand for houses of some 450,000 units in Spain over the next nine years.

He also doubted house prices would crash given the shortage of residential land in Spain, which accounts for about half the cost of a house. Pérez said the more likely outcome would be for prices to remain steady in real terms next year.

However, the Catalan Institute of Construction Technology (ITEC) yesterday predicted a more pronounced downturn in the sector. ITEC is forecasting an 18-percent drop in home construction over the next two years. “You can’t speak about the soft landing we were forecasting six months ago,” ITEC director.

The drop in activity is also being to show itself in the labour market, with the number of real-estate agents signed up with the Social Security system down 4 percent on a year earlier. The Labour Ministry expects this trend to continue next year.

The construction industry as a whole, however, is holding up better, with the drop in the number of Social Security members in the sector down only 1 percent.

Subject: Spanish news