Wednesday, 8 February 2012

The Future of Construction in Spain to 2015 Austerity Measures and Budget Deficit to Deter Growth


Between 2000 and 2007, the Spanish economy recorded an average annual growth rate of 3.6%, which was attributed to growth in the Spanish construction industry and in particular, the growth of residential housing in the country. However, the growth in the Spanish housing segment was unsustainable, as the number of housing completions exceeded the rate of new house hold formation in the country.

London, February 08, 2012 – Within the Spanish construction industry, residential construction was the largest market with a share of 50.7% in 2010. In terms of growth, commercial construction was the fastest growing market, recording a CAGR of 1.51% during the review period. This was followed by institutional construction, with a CAGR of 0.13% (reference figure 1 below).

Between 2000 and 2007, the Spanish economy recorded an average annual growth rate of 3.6%, which was attributed to growth in the Spanish construction industry and in particular, the growth of residential housing in the country. However, the growth in the Spanish housing segment was unsustainable and the Spanish housing market and property boom burst in 2007. Following this, the onset of the global financial crisis further exacerbated the problems in Spain’s residential housing market. Consequently, the Spanish economy, entered into a recession and unemployment in Spain rose to 20%. As a result of these developments, the Spanish construction industry recorded a CARC of -2.89% during the review period.

Between 2011 and 2015, the large quantity of newly built unsold housing, office and retail space and other categories stock is expected to contribute to the moderate growth of 1.05% in the Spanish construction industry. During the forecast period, growth in the Spanish construction industry is also expected to be weakened by the Spanish government’s austerity measures, which aim to bring the budget deficit in the country within the EU 3% limit by 2013.

In 2010, residential construction accounted for 50.7% of the Spanish construction industry. However, as the housing and property market recorded a downturn, an estimated 1.4 million new houses remained unsold in the country in 2010. Consequently, ICD projects the Spanish residential construction market to achieve a CAGR of 1.97% during the forecast period.

During the review period, the increase in the rail category was attributed to the increased focus on the rail sector as part of the Strategic Infrastructures and Transport Plan (PEIT) 2005 to 2020, unveiled by the Spanish Ministry of Development in 2004. Under the PEIT, 48% of the EUR250 billion expenditure is expected to be invested in the rail category, as the Spanish government plans to develop a High-Performance Network of rail across the country.

Throughout the review period, the Spanish commercial construction market recorded a CAGR of 1.51%, which represented the strongest performance within the Spanish construction industry. With tourist inflows into Spain increasing in 2010 and 2011, construction activities are expected to resume from 2012 onwards when the current stock of unsold space is used. During the forecast period, the commercial construction market is projected to record a CAGR of 0.78%.

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