Foreign money boosting Spanish construction sector

Between 2014 and 2015 activity in Spain’s construction sector has risen 80-fold, according to data.

After the devastating economic crash that shook the western world in 2008, few experts could have foreseen any way back – at least for many years – for certain industries hardest hit by the worst financial crisis in a generation…

One of those industries that was all-but wiped out during those lean years was the Spanish construction sector, specifically the sector concerned with house building. Here was an industry staring at not only the ruins of its own ambitions, but also an existing and overinflated property market where homes that had stood for decades could not sell, even at distressed prices.

However, the road to recovery has been long and arduous, and now, eight years later, it appears that life has flooded back into the sector – largely as a result of foreign investment.

Overseas investors have been eager to pour money into some of Spain’s more popular regions, including Barcelona, Madrid and the Costa del Sol, and recent data has revealed a sharp increase in the number of building permits being requested in these areas.

According to data from the Economy Ministry, construction and real estate accounted for over one-third of the €22 billion in foreign investment steered towards Spain in 2015, with that trend widely expected to have continued and strengthened in 2016.

Compared to the peak years of 2007, construction activity is still some way down on those levels, but last year activity in the sector was 80 times that seen in 2014, which is an incredible about-turn in fortunes and attitude.

“The market has fired up precisely because players have come from overseas,” said Knight Frank property consultant Ernesto Tarazona. “There are some local investors left, but not many.” Foreign investors have been attracted by low interest rates, the strengthening Spanish economy and the rising confidence that is evident throughout the sector – spurred somewhat by Bill Gates’ decision a few months back to invest in Spanish property.

Property consultant CBRE expects that demand for new housing units in Spain is set to increase to 180,000 annually over the next decade, predominately in Madrid, Barcelona and along the Mediterranean.