This news article was originally written in Spanish. It has been automatically translated for your convenience. Reasonable efforts have been made to provide an accurate translation, however, no automated translation is perfect nor is it intended to replace a human translator. The original article in Spanish can be viewed at Entrevista a Josep Ramón Fontana, Jefe de la Unidad de Prospectiva Económica del ITeC

"In Spain there is no reasons for the housing crisis were infected in other sectors"

Interview with Josep Ramón Fontana, head of the unit of economic prospectives of the ITeC

14/02/2008

February 14, 2008

Last December the Institut of the technology of the Construcció de Catalunya (ITeC) has announced the results of the latest Euroconstruct report regarding the situation in the sector of the construction at European level. One of those responsible for drafting the report for Spain talks about the real situation of the sector in our country.

Josep Ramón Fontana.

The construction activity in Spain will fall by 0.8 per cent this year and 1.8% in 2009 by the crisis of housing, according to the latest Euroconstruct report. Why is this situation?

It is a reaction to the decline in demand. The sector is reducing their levels of production of new plant housing since that buyers are scarce. On the one hand, the compradores-inversores are migrating towards other markets because the Spanish residential sector has lost the appeal of yesteryear from the moment that prices started to slow their climb. And on the other hand, buyers looking for a home for their own use are postponing the most decisions in the expectation of lower prices and greater certainty in the financial market.

What provisions are there at European level?

The forecasts for the construction in Europe have also worsened and now expect growth of just a 1.5 per cent of average in the sector total growth for 2008 and 2009. Again the culprit of this very discreet behavior is residential construction of new plant, and is that the housing crisis is not a unique phenomenon of Spain: among the other big EU countries, red numbers in the residential markets of Germany are expected for 2008Italy and United Kingdom, and France can reach in 2009.

Not too long ago would be handled the hypothesis that residential construction was going to experience a 'soft landing' after their heyday. Is it today still a valid hypothesis?

It must be acknowledged that the slowdown is occurring faster than anticipated in early 2007. But even if the process is precipitated, there are still arguments to contain the alarm. A cycle is usually understood as a process in which there is a starting position, a few years of growth, and a return to the initial situation. In the case of Spanish the housing sector, there are expectations that the return or landing phase not to return to the starting position, but to an intermediate point: nor as low as 300,000 homes that were common in the mid-1990s before the boom, or the 800.0000 housing of the best moments of the cycle. It is believed that in the next decade the Spanish residential sector can move in a sustainable manner around half a million new homes per year.

What measures should be taken in the construction sector this situation?

We must return to pay more attention to the real needs of the market. We left behind an era in which the demand picked up all the product that the sector was able to produce: good product and the less good, also. This is over, and not only because buyers can afford now be more demanding, but above all because the financial sector is not predisposed to assume the risks of yesteryear.

What is the role of the Administration to this circumstance?

Public housing seems to be intended to recover the role it had played before the real estate boom. In fact, in 2007 has already begun around 100,000 housing, a figure no inconsiderable which represents approximately 15 per cent of the market. It must go back to 1998 to find a similar fee. This is to continue in this line, since it is beyond any question that there is a significant demand that cannot access the conventional market, and which is still much to experience on the issue of the rent, a very neglected by private supply market.

On the other hand, civil engineering concentrates the greatest growth prospects for 2008 and 2009. What are the strong points of this sector?

I would highlight two: in the medium term of transport infrastructures, to undertake the current Government and plans to the following to an investment effort ongoing and programmed; and also, the growing role of private participation in the financing of such projects.

The case of the countries of Eastern Europe is unique because it differs from the average of the Euroconstruct area, why is this difference?

The combined markets of Slovak and the Czech Republics, Poland and Hungary will grow an average of 9 per cent per annum during the period 2008-2009. The sector that will contribute to these results more clearly will be civil engineering, where expected increases of around 15 percent. European funding is playing a clear role driving, similar to that witnessed in Spain at the end of the 1990s.

Since the ITeC make special emphasis that all these results are must not deduce that the entire sector is going through a bad time. What message wants to convey to the agents of the building?

In most of the countries of the Group Euroconstruct there is the belief that the different sectors of the construction - residential, non-residential and civil engineering - behave substantially autonomously. This means that the housing recession can co-exist perfectly, for example, with a non-residential growth market, as is happening in United States. In the case of Spain there is nor reason for the housing crisis were infected in other sectors.