The massive closure of developers after the real estate crisis and the low size and capital of those that survived, which makes them very dependent on bank credit that has been reduced, are slowing down the construction of properties in Spain, according to a study carried out by Renta4.
“The footprint of the bubble and the atomization of the sector define the supply of housing development in the country,” says Javier Díaz, securities analyst at the firm, stopping the attempts of public administrations to boost the supply to stop the rise in prices. purchase and rental prices.
According to the most recent data from the INE, between 2008 and 2020, 41,146 promotional companies closed (38%) and of the 65,229 that survived, 51,133 (78%) do not even have employees, and another 11,110 (17%) have with one or two. Only 2,986 have more than three employees and, therefore, true operational capacity, barely a third of the 8,508 in 2008. Many, says Renta4, are local or regional promoters.
As explained by the director of Aliseda Land, Luis Alonso Plaza, in a forum held this week in Barcelona, ??“the majority of the smallest developers now have little financial capacity,” which is why they need credits both to buy the land and to finance construction expenses. In this context, the real estate company, owned by Blackstone, has put up for sale a portfolio of land in which it offers developers to pay only between 5% and 10%, and the rest after a year, “when it is already “They will have been able to start the pre-sales of the apartments and therefore have access to bank credit.”
Beatriz Toribio, general director of the promoters’ association APCE Spain, recognizes that there are few firms that can buy the land they need “at their own expense”, that is, with their own resources. According to the appraisal company CoHispana, land represents on average 23.6% of the cost of a development, “but in large markets it reaches 40% of the price of apartments,” Toribio clarifies. “Land is expensive because there is little of it, but buying it is very risky: administrative procedures take forever and in all communities there are towns with urban planning plans stopped.” For this reason, she assures, “there is no national capital, nor international capital, that invests in the development and management of land.”
The Bank of Spain, in its latest report on the state of housing, has already warned that its construction is conditioned “by the scarcity of investments destined for the acquisition and promotion of new urban land”, which it attributes to “the high uncertainty associated to the profitability of these investments and to the limitations in the availability of financing for these activities.” For this reason, he assures, “investment with own resources has not been able to compensate for the limitation in access to credit”, a restriction that the issuing bank “sees as consistent with prudent practices on the part of banking entities.” Real estate credit closed 2023 at 69,748 million euros, just 20% of the 322,984 million it reached in 2008, and has fallen uninterruptedly since then.
The decapitalization of developers especially slows down construction for rent, according to the Bank of Spain, “since the cost of capital of these activities, with a greater associated risk, is higher.” The impact is greater in social rental housing, “where the failure to periodically update the price of the module, in a context of rising production costs, puts downward pressure on the expected profitability of private investors.”
The consequence, regrets the Bank of Spain, is that the construction of new housing “is significantly below the net creation of households in 2022 and 2023, an unprecedented fact in the history of the Spanish real estate market”, in which always there had been an oversupply of housing. In his opinion, in the last two years the deficit has been 375,000 homes, to which another 225,000 will be added in 2024 and 2025.
