Prado is confident that the 'Living Costa del Sol' initiative will boost British and German residential demand

Sur in English | Entrevista (President of the Provincial Association of Builders and Developers) 

Few people can take the temperature of foreign demand for holiday homes as he can. The popularity of Torrox among Germans (who make up three thousand of a population register of 12,000) owes a great deal to this man from Madrid, who studied German and who came in 1972 to spend one year there while working for Orbis Bank. That was forty years ago and he has now created 5,600 homes in his profession as a developer and builder. The fourth crisis to be noted in his diary is currently showing no signs of going away.

With so much bad news on all sides, telll me something positive.

Well, the housing stock is reducing. We had 24,000 properties in 2009 but that had dropped to 10,000 last year so developers are now thinking about new projects. It may not be much, but after four years of drought any drop is welcome... I hope that in 2013 there will be more development. You have to bear in mind that 30 or 40 per cent of the product was bought by foreigners and this dynamic, and the property bubble, was damaged more by town planning corruption than by the financial crisis. Now we are trying all ways of telling the British and the Germans, who have always been loyal to the Costa del Sol, that it is the same all over the world and that here the legal insecurity has come to an end. That isn't just what José Prado Seseña, the president of the Association, says. It is what the institutions and the provincial government are saying.

And is the message getting through?

Yes, because we have this public guarantee which is highly regarded and, among Spanish tourist areas, we are pioneers in this initiative. Everything which is sold on the 'Living Costa del Sol' page is guaranteed by the provincial government. In November we signed agreements with marketing people in England; in March, with others in Berlin. On May 19th we are going to sign in Sofía and on the 21st in Moscow... In Berlin alone we have signed agreements with 48 points of sale to the public in Germany.

But the crisis is everywhere. The demand will need to be reactivated...

The demand exists, but people are now buying in the Algarve, in Croatia and, to a lesser extent, in Turkey.

What do they offer, compared with the Costa del Sol?

The climate is similar, but legal security has never been destroyed there. In Portugal there has never been a single town planning scandal. It has taken our market.

So the situation looks bad?

Well, not in all ways because nobody can compete with our 9.3 million tourists on the Costa del Sol, of whom 750,000 are German and 2.3 million are British. There is a great loyalty to this area but what we have to do is restore confidence.

Has the damage been that bad?

There has been a great deal. For example, the countryside in La Axarquía, where there are 18,000 illegal homes, or in Almeria, in Cuevas de Almanzora, with 30,000.

Those affected are not satisfied with the decree approved by the Junta to legalise these homes in certain ways.

What do you think of it?

It leaves them in a legal limbo, but that is how it has to be. You can't act against the law, against the LOUA and the POTA. Some homes - and we're talking about self-builds here - can be made legal and others, those which have been built in protected areas and areas susceptible to flooding, can't, no matter what the owners want. With the former, they just have to pay the cost of having things put right: plans, an architect, licence and services like water, drainage and roads. A Town Hall with 30 or 40 houses in this illegal situation cannot be expected to pay for this infrastructure.

I suspect you won't have many friends among those owners.

We have offered them help, with everything, but bear in mind that the majority of these people are from Northern Europe. I always say to them: "What you have done here, would you have done it in Manchester, in Liverpool, in Bremen?" No, they would not.

But they claim they didn't know, they acted in good faith.

They claim they were cheated. Well, we have courts to deal with such things, but they should be aware that their homes are illegal from the time the first brick is laid.

Imagine that I know nothing about the crisis and explain to me what happened.

First, what has happened is clearly a Spanish situation and it has to do with this idea of property ownership. I have lived in Germany and there, 85 per cent of people rent. A German never expects to work in the same place all his life. They buy after the age of 50. Many of them buy their first home here on the Costa. Second: Why were one million properties built between 2002 and 2004? Because, apart from what I have just mentioned, we had these 57 million tourists and 0.01 per cent of them loved it here and bought. In 2006, in Malaga, 16,800 properties were sold to foreigners, that's 40 per cent of all purchases on a national level. Malaga has always been number one. Everyone who comes here wants to stay, including the Spanish. Malaga natives don't even make up 30 per cent of the total, but there was never a stock of housing until, one Monday in 2007, the banks turned off the tap. The bubble burst because Lehman Brothers went down... If the banks gave money to those who were interested in buying, it would be a different story.

You say that construction is not the way for Malaga to exit from the crisis, but it will not do it without construction.

Yes, because construction is 12 per cent of GDP, although if we add the 27 related professions, from architects to cleaners, we are 24.5 per cent. Without construction, there is no way out. It has played a dominant role. When people ask me why Malaga has concentrated so much on construction and tourism, I tell them not to blame us, lay the blame on the politicians who have not known how to look for alternatives.

With the crisis, the number of companies in your association must have fallen.

It has fallen, naturally. Of the 22,000 companies which have closed during the crisis, many were estate agencies. Many developers were builders as well and they left one of those activities to one side. We are not compatible with other activities.

How long will the crisis last?

We need the national market to recover. There is demand but there is no decision to buy. There is fear. People are saving, because in 2011 savings went up by 12 per cent. The problem is to give a clear horizon for employment and another important thing is to oblige financial institutions to give loans.

The banks could form part of your association, with the volume of property they own.

The banks don't tell us, so we don't know how much they have, but 50 to 60 per cent of housing in Spain is in their hands. They have no problem. They have the product and the credit. If they gave us credit, the problem would be halved.

How far have prices fallen in Malaga?

Up to 40 per cent, but it can't go further. From that point, you have to talk to the bank. We begin to enter into their money. The developer can't reduce the price any more.

If nothing in construction will ever be the same again, how do you see the future?

Housing has a great deal to do with social reality, like employment and labour mobility... We always follow the market. If people are only going to rent, we will build properties to let. Or if public housing is the reality we would build that, as long as there is a profit margin.

In 2010, the Junta, the banks and the sector signed an agreement to relieve free housing stock. That failed...

It failed, but because of the banks. None of the 23 who signed fulfilled their promise to answer the operations which came to them within a month. It was a bottleneck. The Junta did play its part, and when it needs to be criticised I am the first to criticise it. There are still over 900 million euros for this agreement, to guarantee the loans.

How many jobs in the sector have been destroyed by the crisis?

About 50,000. Now we're giving work to 52,000 to 54,000. A builder or developer takes six to eight years to build a team... it's not easy.

Few sectors are experiencing such a difficult situation, but few had such a long period of boom.

That was from 1999 to 2007. Land was scarce and we had to pay a great deal of money for it. We invested our earnings in the prime material, which is land, and that land is now devalued. That's what happened to the earnings. Some companies have managed to ride out the crisis but others are in debt.

Most of them?

The big ones, all of them. The small ones, almost all, because they have needs and were swept into the whirlpool.
Nevertheless, construction made many small business owners in the sector multi-millionaires.

If we had earned as much as that, not as many would have collapsed after 2007. It was worse for small businesses. The banks demanded guarantees from personal assets. It caught us all off-balance. It wasn't the property bubble, it was the financial one.

Public debt is another matter altogether for your association.

That of the Town Halls is being resolved. The intervention of the Government in the payments up till 31st December amounts to about 300 million. At the moment the Junta owes us 1,780 million euros in Andalucía and 300 million of those are owed in Malaga. There is a big problem. They told us last year that we had to wait to invoice them because of treasury problems. Now the decree only recognises the debts which were registered at 31st December 2011. A lot of people trusted the Junta and took it at its word. It would be fraud for an Administration to say to you, don't give me the certification, wait, and then tell you that they aren't going to pay you because you didn't provide the certification. We are going to take this very seriously.

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