Abstract
The expansion prior to the outbreak of the crisis in Spain has been driven by a bubble in the construction sector, mainly in the real estate activity. It constitutes a speculative dynamic in turn profoundly interesting for the economic analysis of the crisis. This is derived from the so-called price effect, which has become the driving force of economic activity, away from its objective foundation—the amount of socially necessary labor time. In this chapter, the author explains the particular factors explaining this bubble, going back in history through the making of the real estate sector, and currently focusing on the economic policy measures since the 1990s that fostered the housing asset bubble. Moreover, the author addresses the main features of the activity of construction and its implications for the whole of the Spanish economy.
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Notes
- 1.
Thus, investment in real estate concentrated a growing portion of the foreign direct investment received, to such an extent that it reached the figure of 30% of the total in 2005 (BoS 2006). But even these data underestimate the real volume of real estate transactions carried out by foreigners, since they only record payments made through current accounts. Probably, the balance of payments underestimates the real flow of foreign capital entering the sector. Specialists such as J.M. Naredo, C. Marcos and O. Carpintero estimate that it could represent double what was officially calculated (cited in Murillo 2015).
- 2.
In this sense, Idoate et al. (2008: 68–69) point out that the dictatorship “seeks to win supporters, rewards political allegiances and serves as a mechanism for the prevention of subversion. Marriage and large family are also encouraged,” establishing as a requirement for the consideration of social housing having three bedrooms with two beds each one.
- 3.
Naredo (2010) explains that for the Franco’s regime, the problem of housing was a matter of public order, so the strategy responded to its interest in controlling political subversion. “It was about making “people of order” and ensuring the conformism of the population by facilitating their access to housing property and tying it, in addition, with important payment responsibilities” (ibid.: 8).
- 4.
The income tax was introduced in Spain in 1979, which favored the acquisition of housing through the 15% discount of its purchase value, as well as interests. However, until 1992 no tax deduction was established for home rental, though it eventually disappeared, and the 1994 Urban Leasing Act proceeded to liberalize rents (see Idoate et al. 2008).
- 5.
In fact, the aforementioned study by García and Zarapuz (2005) shows that, in spite of the liberalization of the land, its cost represented most of the price of housing in the years of the boom, and in an increasing percentage.
- 6.
But it has been the growth model, supported by intensive labor sectors and with demand for unskilled labor (see the next chapter), which has involved the inflow of immigrants.
- 7.
Keep in mind that the figures vary depending on the database, which can be the MPWT, the College of Architects, or private institutions related to this sector.
- 8.
It is necessary to make reference to the discrepancies in these data. In the SNA series with base 2000 (NSI 2011), the GVA of construction goes from representing 7.5% of the total in 1995, to a maximum of 12% in 2006, with an average higher than 11% between 2005 and 2008 In the next series, based on 2008 (NSI 2014), these figures change: 9.5% in 1995, and a maximum of 14.1% in 2006, and the average of those four years rises to 13.8%. However, in the last update (NSI 2018), this increase in the GVA share appears very limited, just two points, from 9.3% (8.9% in 1997) to 11.7% in 2006. Expressed in percentages, it also shows significant differences, since the first series implies a relative growth of 61%, 43% the second, and 26% the most recent. Therefore, the continued update of the SNA shows a lower growth progressively in the GVA share of construction during the boom.
- 9.
It is, by far, the biggest fall of all sectors, only the extractive industry has a comparable decline (−7.6% annual), and double the next, the financial sector (−4.7%).
- 10.
I follow here Mateo and Montanyà (2018).
- 11.
Uxó, Febrero and Bermejo (2015) estimate that the reduction in the number of jobs that are directly or indirectly associated with housing was about 2.3 million in absolute terms between 2007 and 2014, which represents almost 70% of the total destruction of employment. Especially in the first phase of the crisis, between 2007 and 2009, this loss of employment induced by construction accounted for 82% of the total.
- 12.
According to Deltell (2008), the surface area built and occupied per inhabitant has tripled between 1956 and 2003. This damage has occurred at the expense of eliminating areas dedicated to forest areas in almost a quarter of the cases, but fundamentally has meant the loss of agricultural spaces.
- 13.
Segura (2012) highlights the strong link of transport infrastructure projects with speculative urban developments, and points out that Spain is the second country in the world in kilometers of high-speed train (AVE), although “we only have a fifth of passengers in AVE that France, or 7% of those that have in Japan,” and the third with more kilometers of highways (ibid.: 33).
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Mateo Tomé, J.P. (2019). Construction and the Housing Boom: Analyzing the Price Effect from the Law of Value. In: The Theory of Crisis and the Great Recession in Spain . Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-27084-1_6
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