Staff Reporter
REAL ESTATE developers are urging Madrid to take action to prevent the incoming market collapse they predict is on its way within the next three years.
The developers believe the rise in housing prices will result in a market crash, paralysing production. When the prices are too high, there will be no buyers resulting in a substantial drop in demand.
Property development company Grupo Ferrocarril president Rafael González-Cobos believes this drop will occur in about three to four years in Spain’s capital Madrid.
He spoke at a real estate event hosted by El Economista, and said a failure to curb the rising prices will eventually reach a point where no one can simply afford them.
“This is going to get progressively worse, and in certain places, like Madrid, despite all our efforts, we are unable to cover the market, and this trend will continue for two or three more years,” Aurora Homes CEO Ignacio Moreno added.
Grupo Gestilar CEO Raúl Guerrero Juanes even predicts that mortgages will end up 70 years in length and have to be inherited by children, if action is not taken.
The developers believe the causes of the increasingly high prices are caused by the difficulty in finding land for construction, accessing adequate financing, and slow moving processes having to move through the regulations and rules surrounding new builds.
Moreno believes taxation is another barrier for increasing construction of new homes to increase supply and lower prices.
“In Spain, the government charges €52.2 billion annually on housing; that’s approximately one-sixth of government revenue, 3.5% of GDP,” he said.
He said a solution could be lowering the tax rate to €40-30 billion.
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Ultimately it is supply / demand that determines prices.
This should be read in context of the measures that might become law, being introduced by the government.
No amount of juggling with taxes, price controls or anything else will avoid the forthcoming crises. History repeats itself over and over – and will again, but you won’t have to wait for 3 years!