Monday, November 28, 2011

Putting figures to the problem

At the height of the boom in September 2007, there were 74,500 people employed on construction sites in the Alicante province and now there are only 24,930. If that seems bad then the future looks even worse for this sector of industry because recent figures show that GDP in Spain will shrink next year by 0.5%. Nobody realistically expects an upturn in the economy until at least  2014 or even 2015 by which time goodness knows how few people will be employed in construction.

There is no new building work going in the region as banks struggle to sell the houses that are on their books. The only alternative for the industry at the moment is refurbishment of existing buildings. When you look around, it is fair to say that there is a lot of scope in that field. Even buildings constructed as recently  as the 60s and 70s are in need of some modernisation.

It might be hard for young people to believe but things were not always this bad. When I was in my 20s, buying your own house was considered the most sensible thing to do. After all, it was the safest investment you could make at that time. During the 70s and 80s through to the 90s, house prices in England grew steadily and so those of us who had invested in property saw a good return for our money. Here in Spain, there was a slump in the market during the 80s but then things picked up again and buying a house here became an equally safe bet.

Not so now because house prices have fallen dramatically in the last few years and so those who invested in land and property in Spain and other countries are facing a loss. To make matters worse, if your property is covered by a mortgage, then you could well owe more that your house is worth at current prices.

In England, the market for first time buyers is starting to pick up as those who are able to secure a mortgage snap up bargains. Neither is there a problem at the top end of the market which has never really faced a slump in sales. It is those in the middle who are looking to move up the ladder that face difficulties. In better times the equity from an existing property would provide a good size deposit for the next purchase. With a slump in prices that is no longer the case. 

Here in Spain, with record levels of young people unemployed and banks strapped for cash, the dream of owning your first home remains just that. And without first time buyers, the market for re-sales has slumped to rock bottom levels. Those with property therefore have to cling on as best they can and like the first time buyers, dream of owning something grander.

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