Role of the Housing Sector in the reconstruction of the Spanish economy
Ignacio de la Torre, Chief Economist at Arcano Partners, provides some clues for the housing sector to play a relevant role in the economic recovery.
According to the author, the residential market, being a highly labour intensive sector, could offset part of the job destruction generated in the tourism sector. In order to play this driving role in reactivating the economy, it would be necessary to take the following measures:
- Increase the construction of housing properties to a normalized level that covers the structural demand for houses due to the expected household formation and other factors. According to the author this level could be 225,000 houses per year, slightly above the historical average of completed houses during the last 20 years.
- Support house purchases through a "Help to buy" program similar to that already existing in countries such as the United Kingdom, in which using public guarantees at around 20% of the cost, the buyer can receive a mortgage of up to 95% of the appraised value from the bank. This measure would have the advantage of not being recorded as deficit in public accounts.
- Promote a national housing rehabilitation plan to improve its energy efficiency, which could be financed through the issuance of a securitization fund backed by state guarantees.
- Reducing red-tape that delays and makes housing construction more expensive, increasing the supply of land, promoting the rental market and offering tax incentives, would be other measures necessary for this sector to be a catalyst for economic growth.