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Quixote Park at housing-crash emblem shows rising Madrid demand

Sesena, a town that came to symbolize the excesses of Spain's last real estate boom is building again - albeit in a more prudent way.

[MADRID] Sesena, a town that came to symbolize the excesses of Spain's last real estate boom is building again - albeit in a more prudent way.

A decade after a ghost barrio of thousands of new apartments in the parched Castilian countryside became a symbol of out-of-control speculation during Spain's property-driven financial crisis, the town - 34 km south of Madrid - is dusting off plans to build thousands of new homes.

Town councillors in late January approved modifications to an all-homes project called Parquijote - Quixote Park in English - first mooted almost 30 years ago, to one that would host an industrial park and half the number of housing units than planned. Sesena Mayor Carlos Velazquez says the plan to mix homes with industry shows the town has learned from the painful years of the property crash.

Even so, Sesena's growth plans 10 years after Spain's last housing boom turned to bust may be a sign of how market bottlenecks and soaring demand are causing Madrid's real estate and rental markets to heat up again, said Fernando Encinar, co-founder and head of research at Idealista, a property website.

"There is as yet no bubble in Madrid but there is a mini-boom," Mr Encinar said. "People will start to move out of the capital to the satellite cities." Well-Digger Sesena entered Spanish property-boom folklore when a builder named Francisco Hernando embarked on a plan for a new high-rise town of 13,500 homes on land near a giant tire dump on the highway running from Madrid to Andalusia.

Spain was transfixed by news about the project as Hernando - nicknamed El Pocero or the Well-Digger - offered a rags to riches story that seemed to mirror the roller-coaster nature of the country's economy at the time as a credit and real estate boom turned to bust. In a 2006 profile, El Mundo newspaper noted Hernando had the biggest fleet of private jets in Spain and a yacht that was longer than the Spanish royal family's.

About 5,000 apartments were built before Mr Hernando's property dream came crashing down in 2007. A dispute over water supply to the apartment blocks gave the town council a reason to withhold occupancy licenses and sales collapsed, said Alfredo Urdaci, a journalist who worked as his communications director from 2009 to 2011. In 2015, Spain's budget ministry listed his construction company as one of the biggest tax debtors.

"He was selling 20 apartments a day and then suddenly nothing," Mr Urdaci said.

Spanish loan defaults soared to as much as 200 billion euros (S$324.3 billion) by the start of 2014 as banks paid the price for lending to developers that went under during a housing crash that had pulled prices down by a third since 2007. The pain inflicted by the crash forced Spain to take a 41 billion-euro bailout in 2012 to prop up its financial system.

Now, as Spain's economic recovery stretches into its fifth year, property prices are rising strongly in the Madrid region, where they climbed at a 12 per cent annual clip in 2017, according to the National Statistics Institute.

The increase is also due to a shortage of homes after building projects stalled during Spain's five-year economic slump from 2009 to 2013 and the fact that Madrid council has been slow to award new building licenses, Encinar said.

The stock of used homes on sale in the city has plunged 43 per cent over the past three years, according to data compiled by Idealista. As well as pushing up house prices, rental costs have soared, jumping 7.9 per cent last year.

"There are fewer and fewer homes on sale, which could provoke significant increases in prices in the short and medium term," said Mr Encinar. "The situation is starting to get serious." Judi Pinarete, a 38-year-old from Colombia who works as a cleaner, decided five months ago to move her family from Madrid into one of the Hernando apartments. "We could no longer afford the rent so we had to leave," said Ms Pinarete.

The influx of new families is a source of pride, said Velazquez, Sesena's mayor. About 8,200 people are now registered as living in El Quinon, as the barrio built by Mr Hernando is known, helping to boost the population of the town to almost 23,000 from less than 5,000 in 2001.

And now, the town's preparing for a whole new project.

This time round, though, the town has rezoned much of the 4.5 million square meter area for industrial use, halving the number of homes originally planned to 3,500. Sesena has learned the lessons from the boom years and will not allow new housing developments that don't have proper services such as guaranteed water supplies, Mr Velazquez said.

As people continue to move into El Quinon, the Well-Digger's dream of a new town within easy reach of Madrid may be coming true, said Mr Urdaci. After plunging more than 50 per cent from 2007 to 2015, the price of property per square meter in Sesena, which includes El Quinon, has risen 15 per cent from its low point three years ago.

"Despite all that's been written, it's a well-made neighborhood," said Mr Urdaci. "It actually makes sense."