Spain - New apartments out of reach for most

Spain — New builds are growing, but housing affordability is questionable

Spain remains one of the most attractive real estate markets in Europe. A favorable climate, developed infrastructure and growing tourist flow stimulate demand for housing among both local residents and foreign investors. However, in recent years, an alarming trend has emerged: prices for new buildings are growing faster than incomes, which makes purchasing their own home unaffordable for many Spaniards. In our article, we will use statistical data from 2022 for analysis, reflecting the general trend.

Top 3 cities by volume of new building construction

1. Madrid is the leader in the number of new projects, and ranks first in Spain in the number of new buildings. In 2022, 4,580 residential properties were commissioned here. The most actively developed areas are Hortaleza, Vicálvaro, Tetuan, Arganzuela and Barajas. The average price per square meter in new buildings in Madrid is around 5,100 euros, but in prestigious areas such as Salamanca and Retiro, prices can reach 10,000 euros per square meter. At the same time, in less popular areas such as Villaverde and La Latina, a square meter costs 1,960 and 2,800 euros, respectively.
2. Malaga — the southern capital attracts investors. The capital of Andalusia ranks second in terms of the number of new buildings in Spain. In 2022, construction began here on 1,610 new homes. The warm climate, developed economy and political stability make Malaga attractive to both tourists and property buyers. Popular residential complexes such as Hacienda Cabello and Martiricos are in high demand among investors. The average price per square meter in new buildings in Malaga is 3,300 euros, which is 660 euros higher than the Spanish average.
3. Valencia is a dynamically developing market, ranking third in terms of housing construction in Spain. In 2022, about 1,400 new properties were built here. The average price per square meter in new buildings is 2,950 euros. The Valencia real estate market has shown a steady increase in prices in recent years, which attracts both local buyers and foreign investors. The city is actively developing, infrastructure is improving, which has a positive effect on the quality of life and demand for housing.

Other regions with active construction of new buildings

In addition to the top 3 cities, there are other areas in Spain where new housing is actively being built:

1. Catalonia — 79,721 unsold new buildings, which is 18% of the total volume of unsold new housing in the country.
2. Andalusia — in addition to Malaga, resort towns on the Costa del Sol, such as Marbella, Torremolinos, Fuengirola, are popular.
3. The Balearic Islands — there were 5,921 new homes available at the end of 2022 (1.3% of the total number of new homes in Spain). Majorca, Ibiza and Menorca attract wealthy buyers from different countries.

Problems and challenges in the Spanish construction sector

Despite the impressive construction figures, the Spanish property market faces a number of problems:

1. Lack of affordable housing in large cities — in metropolitan areas such as Madrid and Barcelona, ​​there is an acute shortage of new homes at affordable prices, despite high demand from the local population.
2. Imbalance in supply and demand in the regions — in some areas of Spain, construction activity remains high despite low demand, leading to a glut of unsold properties on the market.
3. Rising construction costs — according to the National Statistics Institute, average labor and material costs in the construction sector have increased by 14% over the past year. This makes new projects more expensive and risky for developers.
4. Tightening mortgage lending conditions — Spain's banks have become more demanding of borrowers, making it more difficult for many potential home buyers to obtain a mortgage.

Prospects for the Spanish Real Estate Market

Despite the existing problems, Spain remains one of the most attractive destinations for real estate investment due to the following factors:

1. Comfortable Mediterranean climate and high quality of life.
2. Stable economy and political system.
3. Growing tourist flow (in 2022, a record 86.5 million foreign tourists visited Spain).
4. Increasing number of international investors interested in buying property on the coast and in large cities.

To solve the problem of housing affordability, the Spanish government needs to take measures to stimulate the construction of inexpensive apartments, as well as to increase the income of citizens. Possible steps include:

1. Providing benefits and subsidies to developers who build economy-class housing.
2. Development of social and rental housing programs for low-income groups.
3. Reducing taxes and simplifying bureaucratic procedures for construction companies.
4. Increasing the minimum wage and creating new jobs in various sectors of the economy.

As for investors, the Spanish real estate market remains attractive due to high demand for rentals, especially in tourist regions. In addition, the country offers favorable conditions for obtaining a residence permit through the purchase of real estate (the so-called «golden visa»).

To summarize, we note that the new-build market in Spain is experiencing a period of active growth, especially in cities such as Madrid, Malaga and Valencia. However, high housing prices and tightening mortgage lending conditions make the purchase of one's own apartment inaccessible to a significant part of the country's population. In general, despite the existing challenges, the prospects for the new-build market in Spain look optimistic. With the right approach, investing in Spanish real estate can become a reliable source of passive income and a way to diversify your investment portfolio.