We have advanced to become a national benchmark in construction projects, contributing to a sustainable future for society through a firm commitment to our customers and colleagues. 
Juan Carlos Bandrés
MANAGING DIRECTOR
The business outlook
The macro-economic forecasts from the leading analysts and official bodies suggest the positive performance of the Spanish economy and rise in employment are likely to continue over the coming two years, though with lower growth rates, maintaining Spain’s position as one of the key driving forces within the European Union.
2017 maintained the sustained growth of the Spanish economy present over the last 4 years, this time accompanied by a significant rise in the creation of employment. From an internal perspective, this expansive cycle is largely based on improvement in productivity and, from the outside, a far more favourable economic situation than expected, with stability in the positive incentives known as ‘tail-winds’.
Real estate business trends
Real estate has also continued its upswing of recent years. Investment in housing continues to be spurred by internal demand, job creation and continued favourable financial conditions. Approvals from Project Management also increased in 2017 (109,047 residences), albeit at a lower rate compared to previous years. Amongst other factors, this shows the counterbalances and difficulties involved in a business that is so complex and requiring of actions as the construction of residential buildings in times with a purported acceleration in demand.
This circumstance has seen a continued increase in purchases and housing prices – prices having risen for the fourth consecutive year, albeit with lower presence of new build. This might prove to be an indicator of a possible depletion of the future customers accumulated during the standstill experienced from 2012-2015. The increase in price dispersion across the Spanish market continues apace, primarily resulting from the strength of the leading Spanish cities where internal and foreign investment is concentrated.
Forecast for 2018
Early data for 2018 suggests that the real estate sector will continue to grow in a stable way. Consolidation of the new “players” and suppliers will enable an increase in the implementation and realisation of new projects, albeit at a lesser rate than in previous years.
Despite clear improvement, investment in real estate lies some 50 percent below its pre-2007 crisis level and the figures from that time are highly unlikely to be seen again in the short-medium term. Leaving aside the imbalances caused at that time, current economic data show the clear disparity in production present in the construction industry resulting from the loss of human and physical capital. This is limiting the possibility of growth and adding inflationary tendencies onto factors arising from public policies based around wage increases, which are expected to accelerate along various paths over the coming months. Similarly, the construction material, energy and labour price indexes reveal the rise in costs that began in the final quarter of 2015 and intensified across 2017.
This same upward trend continues in the other key area in development. The fall in aggregate land values country-wide is, as noted, a result of the repercussion from this notable growth in the major cities, leading to greater uncertainty being transferred to secondary sites. This trend is tempered by the increased requirements from financial institutions when funding is sought. Furthermore, this unfavourable situation for the sector must be addressed within a context of anticipated growth in CPI and, above all, in interest rates. This has an equally negative impact on accessibility conditions for those seeking to purchase real estate, in a market that is already in decline due to the low net residential property creation rate. The knock-on effect of these elements in terms of limiting the sales price of new build will depend on the scope for improvement in residential assets and the level of indebtedness (at risk through the enactment of future tax rises).
Conclusion
In any event, one must see that these provisions are taking place under circumstances in which risks from outside the business are on the rise, both from an internal perspective given the uncertainty of the national political situation and a lack of clear solutions to the current imbalances – in particular elevated public debt – and internationally, thanks to an increase in protectionist trends and trade wars, all of which may generate notable future turmoil.