Investors cautious after Spanish housing crash

Investment into Spanish construction giants, including BAA owner Ferrovial, was thrown into doubt this week by a Spanish housing and construction market crash that wiped 65% off the value of some companies.

Ferrovial, whose share price dropped 5% to *78.30 (£53.34) during the week, survived the worst of the crash, but analysts warned that investors may be reluctant to plough money into Spanish contractors in the short to medium term.

The crash, which began in the housing sector before rippling through related industries, signalled the end of a 10-year housing boom in Spain.

Ewan Macaulay, an analyst at international ratings agency Fitch Ratings, said Spanish contractors had been protected from the initial impact of the crash because of their diverse portfolios, with many having already scaled back residential property arms. However, he said: “Bankers and investors may become more cautious over Spanish construction companies in terms of future financing.”

Ferrovial bought BAA for £10bn last year. The airports authority is committed to a 10-year £9.5bn construction programme.

The effects of the crash spilled over slightly into the UK market, with investors worried about knock-on effects. However, analysts said it was unlikely that prices in the UK would fall in the medium to long term.

Ian Smith, chief executive of Taylor Woodrow, which is involved in housebuilding in Spain, said the company’s order book in Spain was encouraging, but that after the crash the case would be “more complex”.

Smith said: “It’s a case of wait and see what happens over the next few months.”

The Spanish crash was partly blamed on concerns about oversupply, and was triggered by a sharp fall in the share price of Valencian developer Astroc, after it revealed some of last year’s profits came from the sale of assets to its chairman, Enrique Banuelos.