Efficiency in housing production
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Real Estate Watch
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this respect, the volume of resources going to the housing segment grew to reach a volume equivalent to 80% of the GDP in 2005, 50 percentage points more than its weight in 1997.
3 Improvements in the land production process. The changes in regulations which occurred in the nineties in respect of planning in Spain have permitted the development of management systems that have increased supply and speeded up the process of producing urban land. A key element in this growth has been the widespread use of systems of collaboration between players as the best methods of adding land to the urban process, which has been boosted by the contribution of private initiative in the planning process.
The existence of an increase in demand was a necessary condition for the strong growth of the development business but it was not sufficient for the most efficient companies to gain market share. In fact, part of the improvement in the results of developers' results came not only from efficiency gains, but also because the companies successfully capitalized on the improvements and the increase in competition that occurred in the finance industry and positioned themselves strategically in the new land generation processes.
In this respect, some features peculiar to the Spanish regulatory system, such as the right to pre-register the new work and horizontal division at the beginning of the work or the possibility of transferring financing from the developer to the end customer, have made it possible to foment the interrelation existing between the development industry and the finance industry.
This high degree of collaboration has been one of the key aspects for the expansion of residential development in Spain. In fact, the closer relation between developers and financial institutions has provided developers with larger resources to build up land stocks, enjoy greater leverage capacity and, consequently, consume less equity, and this has brought larger profits and territorial expansion.
As regards the generation of land, the improvements introduced in the middle of the nineties in the production process meant that in the period 1998-2005 an average of 225 million metres a year was classified as urban land, while in the decade 1987-1997 this average was of just over 140 million square metres. Despite this increase in supply, because of the strong growth of housing demand, property prices have risen and this has been clearly reflected in land prices. Thus, part of the income generated in the housing market has reached land in a residual manner, although there have not necessarily been any efficiency gains.
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