Photographer: Angel Navarrete/Bloomberg

Madrid's Crane Forest Shows the Good Times Are Back

Sales of newly-built homes in the capital are at their highest in six years
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Spain’s long-suffering property market is staging a comeback; just count the cranes towering over Madrid.

Real estate service firm CBRE Group Inc. is using satellite images provided by Airbus to track building activity. They show 250 cranes currently deployed in the Spanish capital, a 5 percent increase from a year earlier, as builders respond to demand for new houses.

The Spanish construction sector continues to recover after housing starts dropped 96 percent from the 2006 peak to a trough in 2013, as an economic crash and banking crisis took its toll on activity. The building industry as a whole will grow about 4 percent annually through 2020, according to the government’s forecast.

“It shows a positive trend as it implies that projects quickly replace each other and therefore activity is constant,” said Lola Martinez, CBRE research director, in a phone interview. “We’re recovering lost time.”

With the economy set to grow in 2017 by more than 3 percent for the third year in a row, demand for homes is growing apace, especially in main population centers such as the Spanish capital and Barcelona.

Sales of newly-built homes jumped about 10 percent in the Madrid region and Catalonia during the first quarter of the year, with overall sales reaching almost 114,000 units, the highest level in six years, according to data from Spain’s College of Property Registrars.

That’s helping companies like Neinor Homes, a residential developer owned by Lone Star Funds, whose shares have risen about 14 percent since it raised 775 million euros ($914 million) with an initial share sale in March.

Unlike in previous economic cycles, Spain is relying on consumption and exports in place of construction to fuel economic growth.

“There is an important difference from the past,” said Felix Lores, an economist at BBVA Research, which estimates an annual increase of more than 6 percent for new home construction for 2017 and 2018. “Usually a surge of the construction activity preceded an expansion of GDP, which was relying on this sector -- now it’s the other way round.”

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