In the first quarter of this year, the number of permits issued for the construction of new-build homes in Spain increased by 6%. A remarkable development because the number of transactions on the housing market, after an increase in 2022, has actually fallen again since December last year.
This seems to indicate that there is an opposite movement going on in the Spanish real estate market.
According to data from statistics agency INE, the number of transactions in the first half of this year decreased by 5% compared to the first half of 2022. In the same period, the number of mortgages taken out even decreased by 14%. However, at the same time, the green light was given for the construction of 55,500 new homes between January 1 and June 30. This compares with 52,357 in the first half of 2022. The increase mainly concerns the construction of apartment complexes, the number of new single-family homes increased during this period right off.
Construction sector is positive
According to experts, this is one of the structural imbalances in the Spanish housing market since the bursting of the real estate bubble. On the other hand, project developers are convinced that there will be sufficient demand for new homes. Since 2009, no more than 110,000 new-build homes have been added in Spain every year, but it looks like this could change in 2023.
According to Javier Kindelan, vice-chairman of real estate agency CBRE, property developers believe there is a growing market for new-build homes and that they would certainly build double what they are doing now if they had the capacity and employees to do so.
Decrease in real estate transactions only for existing homes
Juan Antonio Gómez-Pintado of the Association of Project Developers in Spain (APCE) also assures that the decline in real estate transactions mainly concerns the market for existing homes. According to him, statistics show that in 2023, of the aforementioned 6%, only 1% fewer new-build homes will have been sold. Still, Gómez-Pintado acknowledges that there have also been problems, including the lack of enough workers and government-released land on which to build. On the other hand, there are also positive developments such as the stabilisation of material costs, which had risen sharply during the corona years.
Interest rate increase
When outlining the current situation on the real estate market, Kindelan also mentions that mortgages have become more expensive after the European Central Bank decided to increase basic interest rates to combat inflation. This not only affects potential home buyers, but also project developers and investors. According to Kindelan, more than 40% of the average income will have to be spent on a home between now and the end of this year.