Rising tide, but not all boats will liftby Josep R Fontana ITeC, Spain
Spanish construction recovery seen at regional level
At first sight, this nautical aphorism seems to be valid for the case of Spain. The recovery of the Spanish economy is now an unquestionable fact, with three years in a row (2015-2017) with GDP growing at more than 3%. The construction market also got back into black in 2015 and has kept growing since then. Therefore, we can say that the economic tide has refloated the construction boat. Some may add that foreign investment has played a leading role too, but in any case, the ultimate motivation for those investors has been the promising economic outlook for the country.
Every reader of the Euroconstruct Spanish report is surely aware that the recovery of the construction sector is not yet very substantial, since most of the growth comes from a single source new housing while the rest of the market remains quite static or is still in recession as in the case of civil engineering. Even if the forecast points to a likely improvement of the weaker subsectors, the Spanish market seems to accept that a complete recovery of each and every subsector is too ambitious a goal. If we put it again in Kennedys terms, this tide will not be able to lift all the boats. The consolation is that some boats floating is a far better prospect than the whole fleet stuck on the bottom, as witnessed during the 2010-2014 period.
New housing as the main driver of the Spanish construction sector is not without its advantages. For a start, we have more statistical sources to track its evolution than in other construction market niches. Since housing started to show the first signs of recovery in 2015, all the statistics (housing sales, prices, starts and completions) showed deep differences throughout the country. There were cities, and later on regions, bouncing back, restarting paralysed housing developments or even starting new ones; and at the same time, other parts of the country were showing no noticeable reaction, or were even decreasing their project pipelines even more. There was no lack of arguments to explain this kind of behaviour (differences in unsold housing stock, differences in foreign demand) but in the end the core reason was as simple as this: people want a home where there are jobs.
Over the last three years, all the players in the Spanish housing market have been on the lookout for the hot and cold spots in the market. As expected, the cold spots have been progressively improving so there are fewer parts of the country impervious to recovery. But at the same time, some of the hot spots have also turned hotter, increasing the pace of new construction projects. As a result, it is not clear now if the gap between the active and passive zones in an early 2015 analysis has shrunk in a very substantial way when we compare it with the latest 2017 data. Therefore, companies are losing interest in what the average national statistics have to say, and are focusing on local/regional performances. Maps seem to be back in demand and media reports display them prominently: it is important for developers to keep checking whether they are in the right places, or if they have failed to identify some new hotspot.
But so far the kind of maps we see in the media are just based on new housing. We wanted to contribute with another map to picture how the whole construction sector (housing, non residential, renovation and civil engineering) is behaving, region by region. Here is the result click on a region to see its indicators compared with the national averages.