A real estate project can take a long time to materialise. Therefore, it is necessary to take into account factors such as the state of the economy, the real estate market and its forecasts. Currently, the materials crisis is slowing down real estate construction, so prices in 2022 are changing and will continue to do so. Knowing this is essential if you want to buy a house, as the state of the economy and the market can be decisive for a project.
Escalating prices in new housing
Rising energy costs and the lack of materials are causing severe tensions in the construction sector. Basic building materials such as steel, wood, glass and cement, as well as many construction products, have been experiencing exponential price rises for half a year. This situation is pushing a large part of the construction companies into a paralysing scenario.
Fadeco (Federación Andaluza de Empresarios de la Construcción), the Andalusian Federation of Construction Businessmen, warns that there is particular concern about the fulfilment of public works contracts, whose prices were calculated by the administrations in a totally different context.
On the other hand, there is also a shortage of land for development, especially in Spain's large cities. In Spain there is not literally a shortage of physical land (with the exception of the centre of large cities such as Madrid or Barcelona), but the cumbersome and heavy administrative procedures to transform land into land for development make the process slow and exhausting. As a result, carrying out a real estate project becomes an arduous task for developers and construction companies.
The developers' 42% plans to bring residential construction to a standstill.
According to a survey conducted by ASPRIMA, 42% of developers plan to stop some of the residential projects currently under construction,
According to the report, up to 75 developments are expected to be halted.
Of the developers that could stop a project, 43% of them plan to stop one project and 34% plan to stop two projects. In the case of projects that have not started construction and are in the pre-sales phase, 56% of the developers consulted plan to stop them.
It is clear to the industry that this situation will not only affect the delivery times of developments, but also their price.
Hyper-regulation: Shortage of finalist land
Spain is the second most physically soil-rich country in Western Europe.
But, conversely, there is not enough to build on. This is due to the heavy and cumbersome administrative procedures that hinder the process of transforming land into finalist land. This slows down the approval and construction time for a new development. The process can take decades in some cases, as has happened for example with the Madrid Nuevo Norte (DCN) development, which has taken more than 25 years to go ahead.
What is clear is that there is a hyper-regulation of land for development, which slows down the process of new real estate projects.
Tightening of bank financing
Due to the aforementioned factors, banks are increasingly reluctant to grant new financing and seek to protect themselves from possible defaults with stricter clauses. This makes access to financing very difficult in certain sectors such as real estate. In addition, bank credit conditions have become so restrictive that real estate companies cannot afford to take risks.
Alternative financing: A small oxygen balloon
Between rising energy prices, the lack of materials and the hyper-regulation of land, bank financing is becoming more and more restrictive in terms of granting new financing. For this reason, alternative financing, from private financial institutions independent of banks, is gaining a foothold in the real estate sector.
In these times, the growth of alternative financing will be one of the keys to prevent the activity of thousands of companies in the real estate sector from coming to a standstill. As a result, it will enrich and boost the country's economy.
DEXTER's alternative financing will provide you with all the resources you need to make your real estate projects a reality. It has more than 30 Investment and Debt Funds, in addition to its high volume of collaboration with financial institutions. DEXTER Global Finance has more than 1,500 satisfied customers in its database, thanks to its speed, flexibility and customer service throughout the process.
The new generation of entrepreneurs, more digital, like DEXTER, will be the key to driving the financial change that is essential for the Spanish economy in times of crisis.
1 Comment
mplrs.com · 26th January 2023 at 12:44 am
Nice post.
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