Else Beekman
Spain’s housing sector has faced a drastic decline since the 2008 financial crisis. Once known for its construction boom, with around 600,000 homes built annually, the country now struggles to produce just 90,000 homes a year.
This sharp decline has resulted in a significant housing shortage, leaving supply unable to meet the demand for both sales and rentals. The impact is evident in the skyrocketing prices across the market, further complicating homeownership and rentals for millions.
Demand outstrips supply
Economists and housing experts, like Félix Lores from BBVA Research, describe the situation as an unprecedented crisis. The housing shortage is driving prices up, and it is especially challenging for young, educated professionals, who face lower purchasing power. The Spanish Central Bank estimates a deficit of 600,000 homes needed to balance supply and demand, both in terms of property sales and rentals.
The crisis can be traced back to the aftermath of the 2008 property crash. Since then, housing production has stagnated, with only 90,000 homes constructed annually. As a result, housing demand has accumulated, and the current production rate does not even come close to meeting the 265,000 new households formed each year. This gap continues to widen, creating a severe housing imbalance.
Government steps in
Recognising the gravity of the issue, Spain’s government and regional authorities have pledged to increase the supply of affordable homes. The central government has committed to adding 180,000 affordable homes, with a significant reliance on collaboration between the public and private sectors. However, this alone is not enough to solve the growing demand.
Complicating factors
Several factors contribute to the ongoing shortage. A significant portion of Spain’s housing stock has shifted to vacation rentals, with over 350,000 homes used for short-term stays, further reducing the number of homes available for long-term residents. Meanwhile, nearly four million homes remain vacant, many in poor condition or located far from major cities where demand is highest.
Spain’s housing shortage is particularly severe in major cities such as Madrid, Barcelona, and Valencia, where job creation and population growth are concentrated. The limited availability of buildable land in these areas only adds to the challenge, as land prices have surged, making construction even more expensive.