Sun, golf and cement: On Spain's latest construction craze
A frenzy of tourism-related development on the Spanish coast may actually threaten the very industry it seeks. by Handan T. Satiroglu in Segovia, Spain
ANALYSIS -- For decades, Spain has been a favorite tourist destination for millions who are attracted to the country’s sunny beaches. The tourism industry, which accounts for 12% of Spain’s gross domestic product, now faces the threat of an unexpected guest: the development hysteria that is filling the country’s coastline with American-style residential complexes, gigantic malls and pristine golf courses. Initially designed to attract an upscale tourism clientele, overdevelopment threatens the long-term prospects of Spain’s tourism industry through a combination of a highly speculative housing market, environmental degradation and corruption scandals.
Spain’s politicians are beginning to fret that the tourism industry might be crippled in the long run by the overdevelopment of the country’s coastal regions, particularly in the face of the alternative tourist offers coming from less-exploited and commercialized destinations in the Mediterranean such as Turkey or Croatia. Minister of the Environment Cristina Narbona recently issued a warning to politicians and developers in the Levant region to stop thinking of the construction “boom” as an economic panacea. Spain can still count on its sunny assets and the favorable conjuncture of tourist flows that draw visitors away from destinations perceived as unsafe to keep its tourism industry alive, but Narbona points out that “in the short term, the construction boom can bring economic benefits with it; in the long run, it will most likely reduce the quality of tourism in the region.”
According to Angel María Beloqui, chief architect of the Urbanism Section in Segovia's municipal government, the economic development that followed Spain’s entry into the EU pushed investing groups and individual families alike to see housing as an investment. The inflation in housing prices, which spiked 17.4% last year, is fueling a profitable economy of speculation, and developers estimate that foreigners are accountable for more than 50% of purchases of coastal homes. Foreign investment in housing went from 2,908 million euros in 1999 to 7,179 million in 2003, a 147% increase. According to a recent Barclays bank survey, the number of U.K. residents who intend to purchase properties outside the U.K. will double from 5% to 10%, a third of which is set to buy their new home in Spain. Germans, Norwegians and Swedes are following the British example.
The arrival of expatriates seeking a permanent place in the sun is already causing concern among local inhabitants and environmental organizations. As reported by The Guardian, locals residents in Alhama (Murcia) fear that the arrival of foreigners erases local customs and radically transforms the landscape; elsewhere, local residents complain of the unfairness of golf courses that use scarce water resources much-needed for a local agriculture in crisis. And yet, what is a growing nightmare for locals is now a blooming business opportunity for companies like Polaris World.
Founded in 2001, Polaris has 4,500 employees who can build your home, golf course, garden, a desalination plant, and even provide you with maid services, not to mention sending your kids to King’s College Polaris World. Polaris’ most luxurious residential unitsin Alhama range from EUR595,000 to a whopping EUR448,000. In an effort to curry the sympathies of local residents to their development project, Polaris offered to pay for school textbooks of local children, but local politicians (including a member of the ruling local Popular Party) initially refused to give the green light to Polaris’ project. This is becoming a common business practice in many coastal areas, but an increasing number of locals in small towns like Alhama are putting significant political pressure on local municipalities to stop business practices that they see as detrimental to the environment and their own survival as a community. Companies like Polaris must inevitably deal with the puzzling world of Spanish local politics, a complex web of economic interests, political rivalries and environmental activism that severely impacts the course of business initiatives in the sector.
Whether this business model sustainable in the long term remains to be seen. Nationwide, the construction sector is a strong factor in the Spanish economy, with an increase from 5.4% to 6% of the GDP in the third quarter of 2005. But experts warn that the “housing bubble” is bound to explode, and an economic recession caused by the slow deceleration of the construction market looms ahead. As Carlos Hernández Pezzi, President of the General Council of Architectural Collegesrecently told La Vanguardia, Spain today has an “over-dimensioned housing market” characterized by high economic risks and significant social imbalances. Angel María Beloqui says this business model is beneficial in the short term because of the jobs it creates, but “it is entirely fictitious: many people invest in housing, and don’t use those homes. We must create other alternatives.”
Corruption scandals are also affecting business practices. In Marbella, construction companies have come under scrutiny for criminal activities that have ended with the indictment of at least 58 people -- among them many local politicians linked to money laundering through speculative construction partnerships and reclassification of land. Expert voices are starting to criticize the “developmentalist” mentality behind these business practices.
Paco Toledano, coordinator of Egologistas en Acción – Almería, an environmental organization, says “This kind of growth is unsustainable. It is a growth forced by corporate interests, which do not mind sacrificing the quality of life of local peoples and destroying the natural, social, and historical heritage. It causes the disappearance of an important sector of local economies.”
And what about the foreigners? As Antonio Serrano, secretary-general for Biodiversity and Land Planning recently says, “Spain has learnt nothing from its developmentalist past. … Wealthy foreigners … are already packing their bags, because it is unpleasant to vacation in an overcrowded place.” Only time, the unpredictability of the highly speculative market, and the constraints set by an already scarred landscape and a degraded environment will tell whether this business model has a future or not.
