Are new-build homes in Spain more expensive due to high raw material prices?

by Lorraine Williamson
new-build homes

While a number of sectors are cautiously celebrating the end of the crisis, there is still no light at the end of the tunnel for the construction sector. Raw material prices for new-build homes continue to rise unabated. Furthermore, there is no indication that this will change in the short term. 

After a 3.8% decline in 2020, the raw material price for the housing sector rose significantly last year by 23.5%. This increase will continue unabated this year, according to a study by the Spanish construction company ACR into the direct cost price of building materials. This development could certainly mean that new-build homes will become about 3% more expensive this year. Moreover, this is on top of the usual rise in market prices due to the low supply and high demand for this type of housing in Spanish cities. 

According to ACR director Guillermo Jiménez Michavila, the increase in the price of new-build homes is a direct result of the high costs for raw materials, electricity, and transport. In addition, the sector still faces significant supply chain shortages. As long as these problems persist, house prices will continue to rise in the medium term, Jiménez says. 

Long-term problem 

Even before the start of the pandemic, the construction sector was struggling with high raw material prices. The fourth quarter of 2019 was the thirteenth consecutive quarter in which prices continued to rise. This trend came to an end when the corona pandemic broke out in 2020 and saw a slight decline. In 2021 (especially the second half of the year), the upward trend in the previous year´s raw material price resumed. 

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According to ACR’s research, the high price level is permanent and will therefore certainly have consequences for the real estate market. The project development of new-build homes will be significantly delayed. It takes time to find ways to realise new construction projects without the final sale price skyrocketing. In addition, the sector is struggling with a shortage of qualified employees, the necessary attention must be paid to sustainable construction and the quality standards for the construction itself and for safe working conditions are increasing. 

Which materials are involved? 

With an increase of around 50%, the price for glassware rose the fastest in 2021. The price for foundations and building constructions also rose by 33.9% and 33.5% respectively. Raw materials for the construction of interior walls increased by 26.8% and for facade construction by 18.1%. 

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