Inflation Affects Housing Constructions And Government Grants Are Still Not Enough

15 Aug 2022 | Blog

Inflation is affecting all national economic sectors including the property sector, more so construction. Increasing material costs are taking its toll on developers and companies related to this market, which is why the Government passed a royal decree to review contract prices.

Nevertheless, the National Building Confederation (Confederación Nacional de la Construcción, CNC) confirmed over 90% of the sector’s companies cannot invoke the decree’s advantages since a study carried out by the Employers’ Organisation discovered 80% of projects -under the 12 month mark-, will be excluded on the premise constructions must exceed a year in length to apply for the price review.

95% of the sector’s companies cannot review their prices as other requirements of the step are costs had to increase at least 5%, the type of construction, or the kind of materials that enter the perimeter. In this sense, the CNC indicated this decree is mainly directed towards large railway and road contracts with ample deadlines, while small and medium-sized businesses ‘still suffer’ the consequences of inflation.

According to the CNC, the Spanish Ministry of Finance is hindering and adding requirements to complicate the application of the measure, which is a problem for the construction sector’s business network as the Ministry is the last organisation to allow revisions since it affects public finances. The Spanish Ministry of Transport, Mobility and Urban Agenda, from which the construction sector directly depends on, has sent out the message ‘every possible effort is being made’ to solve this issue.

In any case, for want of new consensus between both ministries, the Employers’ Organisation asserted delays in constructions are causing withdrawals and ‘paralysis’ in the sector on a whole, which could affect the amount of purchases recorded during the current year and harm buyers of property still under construction.