Construction licenses rise 57 percent

Construction licenses rise 57 percent in the first three months of 2016

In Madrid and Barcelona, the market for residential development has recovered from the devastating moment lived by the crisis thanks to the arrival of foreign investment to real estate developments.

From luxury homes worth millions of euros to modest flats for the middle class, the resurgence shows how the Spanish economy is coming back to life.

In 2015 construction and real estate has accounted for about a third of the nearly 22,000 billion foreign investment in Spain, according to the Ministry of Economy, and funds in residential construction have been more than 80 times higher than in 2014.

According to the Spanish real estate portal Idealista, the residential market yields have increased to 6.1 percent in the second quarter, five times the return on government bonds in a 10 year term.

Madrid figures fourth in the ranking for 2016 which PWC produces on European cities for real estate investment while Spain rose seven places to be placed ninth worldwide in the ranking of EY (international consultants) on real estate attractive.

Investments have ranged from the purchase of rented apartment blocks to packages of mortgage debt from subsidiaries of banks.

Investment funds have become the new promoters, looking for a profit in residential construction seeing the lack of adequate assets in certain areas. The consultant CBRE expects an annual demand of 180,000 homes during the next 10 years.

The company Rockspring is funding a real estate development in a nineteenth century building in Serrano Street, a most exclusive area in Madrid where nine apartments will be costing between 2 and 8 million euros each and already 60 percent of them are sold.

Other promoters such as US fund Pimco and LAR group are investing in the development of about 40 houses in the center of Madrid with pool and spa with an expected starting price of around 3 million euros.

However, estate agents and promoters are noting that, in contrast to the boom years before the bubble burst, most potential buyers of the luxury market in Madrid are wealthy Latin Americans.

Although the Brexit could have an effect on the market of second coastal residences where a devalued British pound will buy less, promoters say this will have a limited impact on urban centers like Madrid and Barcelona.

At a national level, the number of licenses for housing construction rose by 57 percent in the first three months of 2016 compared to the same period in 2015, the largest annual increase in a first quarter since 2009.

Expert believe the increased activity is due to the normalization of the market after the recession, rather than another bubble. Sales of new apartments recorded a monthly rise in April for the first time in two years, but still only a fifth of those registered before the crisis.

Maria Arcenegui Siemens

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