MADRID – Spain has been struggling with a serious shortage of housing in the right places for years. Supply cannot keep up with demand. The lack of available housing is especially great in the Madrid region and Catalonia.
The current annual construction production of 80,000 to 100,000 units clearly falls short of meeting the expected need for new houses. That need is estimated at an average of around 200,000 per year.
Also read: What will the Spanish housing market look like in 2024?
The housing shortage, the main driver of rising prices, is particularly acute in the country’s major real estate markets. Remarkably, in Catalonia and the Autonomous Community of Madrid alone, 800,000 new homes would be needed over 15 years to meet housing needs, taking into account expected population growth.
These estimates come from Sociedad de Tasación and are included in an article by El Economista. The valuation association emphasises that both regions concentrate 50% of new housing demand. “That is a huge amount,” said Consuelo Villanueva, director of the Sociedad de Tasación.
A growing housing shortage
Over the past decade, there has been a clear imbalance between the supply and demand for housing in Spain. According to the appraisal association’s forecasts, this trend could worsen over the next 20 years. Fewer and fewer homes are being built while the population continues to grow. During the real estate boom, between 500,000 and 600,000 new homes were built annually.
While there are urgent housing needs in Catalonia and the Autonomous Community of Madrid, other parts of the country, such as Castile and León or Asturias, will experience the phenomenon of population decline.
Slowdown in price growth
As for prices, Sociedad de Tasación’s analysis points to an imminent slowdown in the growth of average unit prices, although the trend is still upward. The company estimates that prices of new homes will rise by 4.1% to almost €3,000/m². In June this will amount to an average of €2,925/m².
This increase is lower than the 6.4% recorded in the same period last year. “Sales transactions are taking longer and price growth is slowing,” the appraiser said.
Regional differences in housing shortage
Currently, data from the end of 2023 indicates that prices will increase by more than 2% annually. However, the Balearic Islands and Madrid lead the rankings with an annual growth rate of more than 6%.
In terms of provincial capitals, the average price of new homes is highest in Barcelona (€5,156/m²), and Barcelona as well as Madrid and San Sebastián exceed the €4,000/m² mark.
At the same time, for the third year in a row, Malaga City remains the Spanish city where the price of new homes has increased the most over the past year (7.2%).
Resistance in the real estate market
Overall, the property market is considered by the appraiser to be very resilient in terms of activity. This is despite nine consecutive months of declines in home sales. Existing homes are most affected by rising financing costs. This is reflected in a decline in the number of transactions of 9.9% on an annual basis in the period from January to October 2023. This is stronger than the decline in new homes (-3.6%).
Despite an overall decline in home sales, it is important to note that the situation varies by region. The autonomous communities of Valencia, Murcia and Northern Spain generally show a better trend in the number of transactions compared to last year. On the other hand, Andalucia, the autonomous community of Madrid and Catalonia still account for half of all transactions.
In terms of provincial capitals, Madrid, Barcelona, Alicante, Malaga and Valencia concentrate 40% of demand, with the capitals on the east coast and some domestic capitals best maintaining their sales rhythm in annual terms.
