Developers turning unsold properties into VPOs

According to the Junta de Andalucia, of the currently 45.000 unsold properties in the province of Malaga, approximately 20.000 properties are suitable to be converted into VPOs (subsidised housing) and are anxious to do so. To date only around 700 properties have been converted.

Now if the Junta is so anxious to convert them, why has this not happened? Well you see, as soon as a property gets VPO status it has to be sold at a considerably reduced price. And surprise, surprise the developers are causing a fuss.

According to the Association of Builders and Developers of Malaga many of the properties being built in Malaga are “houses with a very big open-plan sitting room and kitchen, suitable for a holiday home but not conforming to the rigid standards for subsidised housing”.

It appears that under the currently regulations (despite having been relaxed) many of these properties would be left out of the scheme due to the size of the bedroom and kitchens.

The other issue is pricing. At the highest price a VPO can be sold for 178.000€. This would be sold to people with incomes up to 3.000€. Guess which price bracket the developers would want their VPOs to be sold in?

The confusing issue about this is if it were simply a matter of reducing prices, it would be assumed that the developers would simply drop the price to get rid of excessive stock. But the problem at the moment for many is a lack of credit, which according to the developers is real problem and the reason why they are not converting the properties into VPOS.

But the housing department has existing agreements between themselves and savings banks to guarantee the loans for the purchase of VPOs. If this is the case, it comes down to greed. It appears that the developers are hoping to ride the credit crisis and be able to sell existing prices and make their expected profits. Unfortunately for them, many will probably not be able to survive the crisis without converting these properties. This is foolish. If these projects were completed now, it would allow the developers to re-invest the monies in further projects. In fact as part of Spain’s stimulus package is the creation of more subsidised housing. But only time will tell what they will do. For our part, a construction project we are involved in was converted to VPO status while applying for planning permission, due to the declining ‘off-plan’ market and the existing demand for cheaper properties.

Andrew Bellés

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