Growth thanks to migration


In April 2007 the shares of the Spanish real estate corporation
Astroc Mediterráneo lost 65 per cent of their
market value within a period of days. And Ferrovial, a
construction company that had seen its shares triple in
value in the course of two years, likewise abruptly found
itself in a downward spiral. Ominous signs in a country
that in 2007 generated twelve per cent of its gross value
added in the building sector — a larger percentage than
in any other country in Europe. The construction boom,
for years the driving force behind Spain’s economy, is
gradually but irreversibly drawing to a close.


The Golden Age of Spain’s construction industry started
in 1986, when the country joined the European Community,
profiting from the flows of funds from Brussels
that accession brought with it. These funds were to
serve to revitalize Spain’s outdated and dilapidated
infrastructure and to give the country’s under developed
rural areas new roads, ports, and railroad lines. For
years the funds received from the European Union
accounted for one per cent of Spain’s GDP. However,
the building industry was hyped up into a regular boom
when Spain joined the eurozone. Interest rates on
mortgages all of a sudden dropped from 15 to three per
cent — and the country’s banks were more than generous
in handing out loans. From one day to the next, just
about anybody was able to build with borrowed money.
In Spain, where some 85 per cent of the population
have invested in property, having a home of one’s own,
be it a condominium or a house, is a matter of huge
importance. The number of building permits issued
per year tripled between 1996 and 2006. In 2006 the
figure was 860,000, more than in England, France, and
Germany together. In this period the number of workers
employed in construction rose from 1.5 to 2.7 million —
roughly one eighth of all persons employed in Spain.




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