Spain is currently experiencing a housing crisis, with property prices rising significantly faster than in other European countries. In the first quarter of 2024, house prices in Spain increased by 6.4%, far surpassing the European average of 1.3%. This surge has made the situation in Spain particularly acute and complex.
According to Eurostat, the prices of new homes in Spain have jumped by 9.9% compared to the previous year, while the European average sits at 6.4%. Additionally, the prices of existing homes have risen by 5.8%, whereas they remained stable across the rest of the EU. Although rental prices have seen a more moderate increase, averaging no more than 3% within the EU, the Spanish government has imposed limits on rent increases to 2% in 2023 and 3% in 2024.
European response to the crisis
The re-elected President of the European Commission, Ursula von der Leyen, has acknowledged the cross-border nature of the housing crisis. She announced the creation of a European Commissioner for Housing and a Plan for Affordable Housing. This is significant since the EU traditionally has no direct powers in this area. Von der Leyen emphasised the need for Europe to address the concerns of its citizens and promised to allocate the necessary public and private investments.
Challenges in the Spanish construction sector
Spain faces a severe shortage of new housing. Currently, around 100,000 homes are built annually, a stark contrast to the more than 500,000 per year during the height of the housing bubble. Since 2007, the number of building permits has plummeted by over 78%, making Spain the country with the most significant decline. This drop highlights the profound impact of the real estate crisis on the Spanish economy. In 2023, the construction sector contributed only 5.7% to the Gross Domestic Product (GDP), compared to 11.4% in 2007.
Impact of short-term rentals
The growing popularity of short-term rentals has exacerbated the housing crisis. Between 2022 and 2023, the number of short-term rentals in the EU increased by 20%. Spain, second only to France, had 141 million overnight stays in 2023, a rise of 19.6% from the previous year. To address these issues, the EU recently approved regulations for short-term rentals via online platforms. This initiative aims to streamline procedures on digital platforms like Airbnb and make it easier for authorities to collect data, helping shape tourism and housing policies. The Spanish government plans to set up a national platform to gather data on these rental forms and combat fraud.
Impact on the Spanish population
The high housing prices have significantly affected Spaniards. In 2023, 13.6% of Spanish households faced arrears on rent, mortgage, or basic utility payments, one of the highest rates in Europe. The limited availability of affordable housing and rising costs force more people to seek creative solutions.
Strain on rental market
Challenges in affording rental properties are increasing in Spain. Half of the rental properties require more than one income to cover monthly rent due to rising prices. In eight major cities, the average rent for a standard apartment exceeds €1,000 per month, with rents reaching up to €1,500 in Madrid and Barcelona. Experts warn that this could lead to substandard housing conditions and a potential “rental bubble” if the economy slows down. The supply of rental properties has decreased by 37.2% nationwide in the past year, while demand continues to rise, driving up prices further.