Residential Building Statistics

In Spain, prior to the issuance of a municipal building permit, a new project must have its architectural plans approved. Equally, before the finished building receives a completion license it must undergo an inspection to ensure that it is up to scratch in the legal sense. The official organism charged with these two tasks is the Colegio de Aparejadores... and they keep and publish statistics which are available from the INE database. With the help of Google Docs, we have converted these series into charts.

The first shows (in yellow) the number of actual residences receiving initial approval monthly since January, 1992. The blue line indicates the same for final certificates and each is accompanied by a 12-period average. Standing out would be the following:

1). New initial approvals have fallen to levels never before seen in this series. And the 12-month average, as of July 2009, is a full 33 percent below its December 1992 value of about 18,000 units;

2). Final certificates, on the other hand, have so far only fallen to mid-2004 magnitudes. Assuming, for the sake of argument, a three-year lapse between the initial contracting of the project architect and the granting of this certificate, we again find ourselves marvelling at how difficult it is to identify and control a real estate bubble. The absolute peak in final certificate issuance was not reached until July of 2008 - the sad result of decisions made in mid-2005. The fact that these numbers have currently only fallen to 2004 values reflects this more than any overriding stupidity on the part of developers. These are projects initiated in 2006, when everything was more or less still functioning, although yes the writing was on the wall.

The second chart compares, since January 2007 (that the INE only started keeping sales stats at this time has to be the mother of all contrarian signals), the above two lines with that of house sales. They are indexed to enable comparison. Stated in raw figures - July 2009 initial approvals came in at 11,233, final certificates at 42,644 and new home sales at 18,351. The banks, developers and real estate promotors still have a couple of years of hard slogging ahead.

But, for those with the patience that personal circumstances and low carry might permit them, a few years up the road (and depending on geographical location) the supply half of this equation will find itself pressured to perform.

As an aside, the figure of 1,098,000 approved but not-yet-started new homes that Mr. Hugh used to invent a total excess Spanish housing stock of 3 million is not confirmed by these statistics. To come up with that number of approvals - and assuming no completions whatsoever - one has to sum all granted back to December of 2006. To arrive at this number in the real world, one has to calculate the natural excess of approvals over completions (some projects never get started, or finished) all the way back to November of 1992.

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