ON a street in central Madrid, Juan Jose Perucho points to where he is going to build one of the capital’s tallest residential blocks after buying a site bigger than five football pitches from the state-owned metro network.

    “We’ve sold faster than ever before on this development,” says the head of unlisted real estate company Grupo IBOSA of the project, which will feature a 25-floor tower with swimming pool and hanging gardens.

    “I’ve seen nothing like it in all my 24 years in this business.”

    Spain is building again after seven years of a crushing downturn in the construction sector with investment in house-building registering its first quarterly rise since before the crisis in the three months from June to September.

    But while this is a sign of Spaniards’ confidence in their recovering economy, construction is unlikely to return to pre-crisis levels, leaving a shortfall in economic activity which has yet to be replaced by any other sector.

    Spanish construction accounts for 5 percent of the country’s output compared to 10 percent in the boom years, or an annual shortfall of about 50 billion euros (US$62 billion), and employs less than half than before the housing crash of 2008, with no quick prospect of a sharp rebound.

    At the peak of its decade-long building bonanza, Spain was putting up more houses per year than Germany, France and Italy combined. This has left a stock of 740,000 unsold new homes, hard to shift as many stand in out-of-town areas like Guadalajara and La Rioja where demand for housing is weak.

    Banks, with 161 billion euros homebuilder debt weighing on balance sheets, much of it soured, are highly cautious about lending to projects and are focusing on high-end developments in Madrid and Barcelona where prices are rising.(SD-Agencies)