Spanish Cities Are Taking Extreme Measures To Capitalize On The Current Real Estate Boom
With the last real estate crash, still in the rear-view mirror, Spain suffers short term memory loss as prices go through the roof.
Spanish cities should have learned from the last economic boom and bust that it’s not good to boast. By most people’s estimations adding pre-fab apartments to the top of historic buildings, because the economy is so hot once again, is surely asking for trouble. With the last real estate crash, still in the rear-view mirror, Spain suffers short term memory loss as prices go through the roof.
“In Spain, we have identified more than 4,000 buildings which have available roof tops to build on,” La Casa’s founder, Joan Artes, whose firm hoists prefabricated apartments by crane onto building roofs told Reuters. “At a time when we lack space to build, we’re talking of more than two million square meters.”
In 2008 when the global housing market crashed certain countries in Europe were hanging on tenuously to complete insolvency. At the foot of the league table was Greece, which, crippled with a refugee crisis, is still languishing in the depths. Not far ahead were Iceland, Ireland, Portugal, Italy and Spain. For Spain, the fall had been spectacular. It seemed for a decade prior, developers could sneeze and make money. Then 2 million jobs were lost and their vibrant status as a center for European culture and tourism lay stagnating in pools of murky concrete water on empty construction sites.
For a whole heap of reasons, most to do with good taste, adding new buildings on top of old apartments shouldn’t be an option simply because a market is bubbling. But when has that stopped a developer before, especially when the housing market is approaching the frothy frenzy of pre-2008? With an estimated growth of 3 percent in 2017, construction now accounts for 10 percent of gross domestic product. Bring on the cranes, shout the developers as city officials appear struck by a case of memory loss.
History may repeat itself if interest rates rise, buyers balk and investors banking on low yield profits lose their narrow margins. But Spain’s irrepressible tourism industry is attracting major players like billionaire’s George Soros and John Paulson (part of the Hispania group) who have been buying up hotels in the Canaries , Balearic islands, Lanzarote and Ibiza like scalpers, snatching up El Clasico tickets for a Champions League final.
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In addition, boardroom buyouts have been gaining momentum with major conglomerate’s gobbling up smaller developers like plankton.
“It is fundamental to gain size. So, there will be mergers and acquisitions and at the end of the day, just a dozen big groups will remain,” said major Juan Jose Brugera chairman of major developer, Colonial.
Unlike 2008 Spain has a few things going for it. Firstly, it’s a place other Europeans seem eager to go to. Brexit has created an exodus from the UK with the sunny climes of Espana a perennial favorite. Britons remain the number one foreign homebuyers, making about 21% of all home purchases by foreigners in 2015, followed by the French, Germans, and Swedish buyers, each accounted for about 6% to 7%. Spain, thus far has a decent record where terrorism is concerned which may also be adding to the European desire to relocate.
Recent history has taught us, however, that what goes up must come down. For those who have invested in rooftop pre-fab constructions in Madrid and elsewhere, they must be hoping that it doesn’t apply to them. Conclusion: Spanish cities are taking extreme measures to capitalize on the current real estate boom.
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