Activity in construction
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Real Estate Watch
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Table 2.2. Official Tenders. Civil
Engineering Millions of euros
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This increase in activity will come from both private and public investment. In this respect, after a year when public works tendered grew by over 10% in nominal terms, in the first four months of 2006 they increased at a year-on-year rate of 6.2%, maintaining the softly slowing profile that started in 2004. The downturn in investment in infrastructures and in ports and airports was relatively offset by the sharp increase in items more related to water treatment and land development, which have been growing fast since the middle of 2003.
In the first four months of 2006, the volume of works contracts tendered by public administrations and regional bodies totalled over 7,850 million euros, which was an increase of 6.2% with respect to the volume tendered in the first four months of 2005. The increase of nearly 150% in the amount of investments going to irrigation, sanitation and water supply and of 75% in the amount going to land development works, together with the reduction of 25% in the volume of investment in infrastructures and 35% in ports and airports, are the main features of the public works tenders held in the early months of 2006.
In the last fifteen years, the Central Administration has accounted for the greater part of tenders, with 45% of the total, followed by regional governments with 30% and local councils with 19%. However, as municipal elections draw nearer, local bodies are increasing their investments and this year they account for nearly 60% of the total. Thus, in the early months of 2006, the lead in tenders was shared evenly, at around 36%, by the State and the regional governments, followed by local councils with 24%. This increase in public tenders in 2006 will also be supported by financing from European structural funds and private funding for some projects under way, so that activity in the civil works segment will continue to grow in 2006, albeit at a slower pace than in 2005.
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Residential investment increases: over 800,000 houses are projected
Real estate development in Spain had a new lease of life in the early months of 2006. This was clearly reflected in the increase in activity in the residential segment, which grew at a rate of 7.4%, nearly a point and a half more than the 2005 average. In view of the large number of housing starts in previous quarters, residential investment will continue to grow at a rate of 7.6% in 2006, and the number of houses completed will increase over the year. Since the last quarter of 2005 and in the early months of 2006, housing starts in Spain increased and this will support the trend.
In the twelve months accumulated up until April 2006, more than 807,000 houses were endorsed, giving an increase of 6.6%. Less buoyant demand will lead the pace of housing starts to slow gently to 775,000 in 2006 as a whole, and will bring a moderate adjustment process in the sector. This adjustment will be more noticeable in the markets on the Mediterranean coast and in the large cities.
In some large cities, the shortage of urban land is one of the elements that is leading to a downturn in real estate development, which is moving to adjoining towns or provinces. Here, Madrid is a clear example: while in the capital the number of endorsements has fallen by nearly 30% in the last three years, in neighbouring provinces they have doubled in the same period. This frontier effect can also be seen in smaller cities.
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Source: Ministry of Public Works and BBVA.
Table 2.3. Housing starts in Spain
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Total Spain
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Large Cities
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Cities/
Total
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Resort Coast/ Coast Total
no. (%)
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no. no.
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(*) The figures for the whole of 2006 are estimates using figures to April 2006
Source: Colegio de aparejadores and BBVA Coast: Mediterranean, Canaries, Cadiz, Huelva
Large Cities: Madrid, Barcelona, Valencia, Seville, Zaragoza and Malaga
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