The coronavirus ‘sinks’ the promotion of new construction after years of recovery of the real estate bubble


The bursting of the housing bubble in 2008 shook the foundations of an industry long accustomed to double-digit growth. The crash was of such magnitude that construction was practically paralyzed for years and many companies went bankrupt.

It was not until 2015 when the sector began to react and timidly recover an activity that still in 2019 was very far from the numbers it exhibited before the crisis.

2020 was presented as the opportunity to reach the desired equilibrium point for both the administration and the sector: build enough to meet demand without falling into new bubble linked to the brick.

But the pandemic has shattered, at least for now, the signs of a strong recovery that the developers and construction companies had shown. The confinement and economic collapse predicted by international organizations have taken a toll on the sector, which is showing a strong contraction compared to last year’s numbers.

This is attested by the licenses that have been requested, for example, at the Valencia City Council to build new homes. If in all of 2019 the consistory had registered 3,223 petitions, this year the figure had fallen to 910 as of August 31. The main cause, municipal sources point out, is covid-19 and the blow it has caused to the economy. And, before the pandemic broke out, the rate of requests was similar to that of previous years.

The council had not presented such low numbers of applications to build houses since 2016, when the sector was still beginning to wake up. So, as of July 31, it had been asked to build 600 houses. And the following year the amount already amounted to 1,510 on the same dates, according to the figures provided by the Valencia City Council, from where, however, they point out that the presentation of applications for housing licenses usually registers a rebound at the end of year.

The stoppage has also been detected among promoters, from which several causes are pointed out: the first, the uncertainty scenario drawn by the main European and international institutions for the country. And the second, to the pause that the entrepreneurs themselves have printed to redesign the houses.

“Many have stopped projects to adapt them to new needs such as balconies, spaces for children and rooms prepared for teleworking. But there is also a percentage that has decided wait to see how the market evolves“, says the president of the Federation of Promoting Companies and Urban Development Agents of the Valencian Community, Antonio Olmedo, who, however, indicates that there have been no cancellations of the works already commissioned.

The architects also believe that activity has slowed down as a result of the crisis, but in a much lower percentage than the figures from the Valencia City Council suggest. “We are talking about a reduction of between 20 and 25% throughout the Valencian Community at a general level, but, for example, the demand for rent has not dropped “, argues the dean of the Official College of Architects of the Valencian Community, Luis Sendra.

In his opinion, if the health crisis can be stopped, the stoppage could be reversible. In addition, although large houses have lost much of the demand, small houses with a small garden plot they are in full effervescence. “We have passed that stage in which many sold the 30 and 50 square meter flats. The pandemic has shown that it was unsustainable and more so when people are indoors for 90% of the day well in at home or at work “, Sendra points out.

The hope of the promoters happens because the recovery that is announced from Europe is articulated through the rehabilitation, a market that moves much more labor. “The rehabilitation that is intended to be moved with the money from Europe generates much more jobs than the new housing. For each rehabilitation work, 18 jobs are created by the three of the newly constructed buildings,” insists Olmedo, who claims that the administration take advantage of the license stoppage to streamline procedures and grant them in less time.

Despite the data and uncertainty, the real estate sector still relies on a progressive reactivation and that construction becomes a locomotive for employment.

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