Banco Sabadell | According to press reports, Madrid City Council, in collaboration with the Community of Madrid, is working on a plan (Municipal Strategic Plan) which could significantly increase the density of new developments, and even increase the building density of land in already established neighbourhoods. Thus, the volume of new homes currently planned in ongoing urban developments, estimated at around 151,749 homes and considered clearly insufficient to meet the demand forecast for the coming years, could be multiplied. The new developments have been designed with a density of 35 homes per hectare (compared to the 144 homes per hectare within the M-30 ring road or the 87 homes per hectare outside the M-30). According to the same sources, the proportion of social housing (which currently stands at around 50%) is also set to increase.
Assessment: We believe that increasing the buildable area of land is an effective measure to reduce the current severe housing shortage and is something that has been discussed within the sector in recent years. As with everything related to urban planning in Spain, it is difficult to estimate whether the measure will go ahead and within what timeframe, given that the process could end up in court and drag on indefinitely (which, paradoxically, could lead to an even greater housing shortage in the short and medium term). Furthermore, all this uncertainty may cause some developers to put their development plans in Madrid on hold whilst they wait to find out whether they are ultimately entitled to increased building density.
That said, if the plan goes ahead, it would be positive for companies with land in the municipality of Madrid (Metrovacesa, HOME), although it is very difficult to quantify the impact, given that the measure may also reduce the attractiveness of land in the municipalities bordering Madrid, where these companies also have exposure (we do not have a breakdown of distribution within the Community of Madrid). 27% of the value of Neinor Homes’ portfolio was in the Community of Madrid (though with significant exposure to other municipalities), and in the case of Metrovacesa the figure stands at 24% (in residential).
