Tourism and real estate boom in Spain: an industry weighed down by cement?

Alfonso Fernández Tabales & Enrique Santos Pavón


Benidorm It is a well known fact that Spain is an unusual case, at a European and global level, due to the spectacular growth cycle experienced by the construction industry since the late nineties of the twentieth century until the outbreak of the crisis in 2007 – 2008, which has led to the practical stopping of the activity.

Benidorm. High expression of housing density on the Spanish coast for decades
– 
© A. Fernández Tabales 

Some brief data
1 are revealing to size the magnitude of the phenomenon:

– In 2006, considered the peak of the growth cycle, 14.17% of the Spanish population was employed in the construction sector (second position in Europe after Luxembourg). Consequently, the subsequent impact on unemployment figures has been brutal (according to the latest annual data known, of the collapse of Social Security members in 2010, 90% came from the construction sector).

– The Spanish housing stock increased by 4.1 million new homes in the 2001-2008 period, which represents a cumulative increase of 18.5% at that stage. Comparatively, the highest value was reached in 2006, with the figure of 18,000 new homes per million inhabitants, compared to an average of 5,000 per million inhabitants in the European Union. The result is that in 2008, Spain tops the EU statistics, with 544 homes per 1,000 inhabitants.


– A considerable number of these homes were sold to foreign buyers (estimated at around 15% of the sales). They are called “geronto-immigrants” or “climate migrants”, who buy them, especially in tourist areas, to reside there after retirement. To assess its significance we must say that during this period, the inflow of foreign capital for the purchase of properties in Spain, every year meant more than 0.5% of the national GDP, with a maximum of 0.9% in 2003.

– The fall of the construction for effect (as well as cause) of the crisis, can be described as a true collapse. As an example, the sale of cement has declined by 45% between 2007 and 2009, or the free housing started in 2010 do not reach 10% of the figures achieved in 2006.

– The final result is the existence of a huge “stock” of unsold homes, whose estimate ranges between 750,000 and 900,000 units, located mainly in the tourist areas along the Mediterranean coast and both (Balearic and Canary) archipelagoes. This represents one of the main problems of the Spanish economy, since it means that the real estate companies accumulate, as of June 2011, some debts with the financial sector of 308.425 million euros, of which 176,000 million are classified as “toxic assets” because their collection is unlikely (according to the Bank of Spain).Breve2

Beach of Matalascañas (Andalusia), june 2011, where almost everything is for sale or rent (or both) – © R. Knafou

Well, in this critical context, which have been and are the consequences for the business and the tourist areas? Why is the phenomenon of great interest to the scientific community specialized in tourism?

A first fact to note is that the magnitude of the phenomenon has generated the reaction, since the middle of the first decade of the century, ie before the collapse of the model, of the tourism business operators themselves, who see the bases of their activity deteriorating rapidly (and thereby joined the voices of alarm that came emerging from academic and environmental groups). In this regard, the taking of a public stance of Exceltur, in 2005 is a compulsory reference (Alliance for Tourism Excellence, association which brings together the leading Spanish tourism companies), which in its document “Impact of the tourism development models in the Mediterranean coast and islands” already expressed concern about the drift of the main tourist areas towards urban overcrowding and congestion, stating that they will diminish in the medium-term, the competitiveness of the destinations and hence, the profitability of their own companies.

The most significant impacts that this situation has caused in the tourist destinations can be differentiated in two main areas:

On the one hand, and as a result of the rapid increase in land prices that accompanied the growth cycle, the difficulty, in some cases, almost impossiblility, to deal with real touristic enterprises (hotels in its most obvious expression) by the high prices of the land in the areas that are most in demand touristically. These prices can not be borne by a hotel project, whose repayment terms are broader, but only by residential products that recover (or expected to recover) the investment made quickly, through the sale of the house to the buyer. This problem has limited the tourist entrepreneurship itself, other than real estate, in the areas with greatest potential for tourist use in recent years, it is noted that although in the last stage it finds some decline in land prices as a result of the crisis, the magnitude of this decrease is still lower than expected, so the problem has not disappeared.

On the other hand, the consequences of the real estate “boom” have been reflected in a deterioration of the overall quality of tourist areas, where the saturation of urbanization has led to a widespread degradation and trivialization of the landscapes, as well as worsening the operation or “metabolism” of the destinations (transport, water management, waste management, urban facilities and services, etc..).

This deterioration in the quality of the spaces is causing a decline in the levels of satisfaction of the more skilled demand segments, of which the first signs in the polls at tourist sites have been detected, which presumably will be shifting to other destinations with better conditions. This diagnosis seems to contradict the fact of the excellent results that tourism in Spain is enjoying this year 2011, however, these results, measured in tourist arrivals or in overnight stays, may be misleading with respect to the underlying reality, as it is be taken into account, firstly, the situation of instability on the South Bank that the Mediterranean countries (Tunisia, Egypt, Libya, …) are going through, which has resulted in a diversion of tourism flows to Spain as a destination-refuge; and on the other hand, the fact that the average expenditure per tourist has fallen, which shows us a scenario of increased arrivals coupled with a reduction in profitability per visitor, conjunction which can be characterized as a serious risk to our destinations in the medium and long term.

Finally, and focusing the analysis at the present time, what is most surprising, almost baffling, is that the study of the municipal development plans that are being developed and approved to date, shows a clear tendency to repeat the patterns of the developer expansion models of the previous decade, even with expected growth rates higher than those known in that decade, waiting excited, and naive, for some alleged European buyers who purchase the “stock” of unsold homes. This raises the hypothesis that at present, through an erroneous practice of urban and regional planning, the foundations or normative foundations are being laid for the next crisis, showing the inertia of a public and private culture that has already proven, in the past and in the present, its economic inefficiency and territorial unsustainability.

NOTES

The detailed statistical sources of the data quoted in the text are available in the publication: Fernández Tabales, A. and Cruz, E. (2011): “Territorio y actividad constructora: del “tsunami” a la crisis. Factores explicativos y propuesta de indicadores a escala municipal en Andalucía “. In Boletín de la Asociación de Geógrafos Españoles, Nº. 56, 2011, Pages. 79-110.

TO CITE THIS ARTICLE

Electronic reference :
Alfonso Fernández Tabales and Enrique Santos Pavón, Tourism and real estate boom in Spain: an industry weighed down by cement?, Via@, News in brief, posted on May 31st, 2012.

AUTHORS

Alfonso Fernández Tabales & Enrique Santos Pavón
University of Seville

TRANSLATION

Alfonso Fernández Tabales & Enrique Santos Pavón
University of Seville