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Land Shortage Causes House Prices to Soar in Madrid

Posted by: In: Real Estate 29 Nov 2017 Comments: 0 Tags: , , , , , , , , , , ,
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5 November 2017 – El Mundo

House prices are on the rise in Madrid, due to the shortage of available buildable land and the high pent-up demand (the Spanish capital is capable of absorbing around 10,000 new homes per year and just as many second-hand homes). That was one of the main conclusions from the meeting organised last week by El Mundo in collaboration with Distrito Castellana Norte (DCN) to analyse the likely impact of the 11,000 new homes that are being planned as part of Madrid Nuevo Norte, the official name for the project more commonly known as Operación Chamartín.

According to Luis Corral, CEO of Foro Consultores, Madrid Nuevo Norte is an “absolutely essential project for that area of Madrid”, because both of the existing urban developments, namely, Valdebebas and Arroyo del Fresno, as well as the neighbouring municipalities, Alcobendas and San Sebastían de los Reyes “have run out of land”. In his opinion, “anything that places this part of Madrid on the market is a good thing, even if it causes price inflation, as seen in Valdebebas, where homes now cost more than €3,000/m2″.

Beyond its importance from a residential perspective, “Madrid Nuevo Norte also involves a major urban regeneration project, which offers a golden opportunity to position Madrid as one of the greatest capital cities in Europe”, according to Carolina Roca, Vice-President of the Association of Property Developers in Madrid (Asprima). In this sense, the final plans – which will probably be approved during the course of next year – include the construction of a large business centre, as well as a major refit of Chamartín station (which will house the future headquarters of Adif and Renfe).

Although this is an ambitious project from every perspective, “the area to the north of Madrid has capacity to absorb much higher figures than the 11,000 homes currently forecast”, says Samuel Población, Head of Residential and Land at the consultancy firm CBRE. “The absorption rate that we have seen in Valdebebas in just five years serves as an example”, he adds.

Moreover, the current rates of house building confirm that demand is continuing to grow right across the Community of Madrid. Based on the number of construction permits granted, the region is currently building 22,000 properties per year, a figure that contrasts with the 80,000 properties that are going to be built in Spain as a whole in 2017. According to Roca, “property development is performing well in Madrid, but the same dynamism is not being replicated across the country and so, we are still a long way off the 150,000 homes per year that need to be built”. That means that the region “has doubled its weight, something that is not positive because Madrid cannot cope with the real estate business of the whole of Spain”.

But the main problem, according to the head of the Madrilenian property developers, is that the municipal authorities are not responding to this increase in demand by offering new plots of land. “The available buildable land will have been used up in three or four years and no one is performing the repositioning that is necessary for after that period”. (…).

The main consequence of the shortage of raw material in the hands of property developers “is a significant rise in the prices of plots, which end up being passed on in the form of more expensive house prices”, explains Población (…).

In this context, Corral also stressed the need to promote new urban developments as “generators of homes for the most disadvantaged households, as shown by the more than 2,200 social housing units included in Madrid Nuevo Norte (…).

Original story: El Mundo (by Rubén G. López)

Translation: Carmel Drake

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