In Spain, housing is only being built for a third of the new households created each year, according to a study conducted by CaixaBank Research. Based on data from April, in the last twelve months, 114,700 housing units have been approved, showing a year-on-year growth of 14.4%. In 2023, 208,000 new households were formed, according to the INE. This year, it is estimated that 330,000 households will be created, and this trend is expected to continue until 2028.
Judit Monturiol, senior economist at CaixaBank's research department and author of the study, states that “population growth has exceeded forecasts and the growth in housing construction is completely insufficient to meet it.” A phenomenon that is further exacerbated by the reduction in household size, which currently stands at an average of 2.5 members but is projected to decrease to just 2.32 in fifteen years.
This, together with the boost to purchasing generated by the decrease in interest rates, has led the entity to raise its sales forecast for this year to 564,000 transactions (compared to the 550,000 it had predicted in February) and a higher price increase, 5% this year compared to the 2.7% it had forecasted in its previous report. According to Monturiol, “the strength of demand and the shortage of supply are conditioning the Spanish real estate sector.”
In your opinion, “there is a great heterogeneity between regions in the mismatch between supply and demand,” and it is particularly striking in the Valencian Community (housing construction only covers 19.1% of household creation), Catalonia (20.2%), and the Canary Islands (21.7%). However, there is no balance in any autonomous community, with the smallest imbalances in Asturias (78.3%) and Navarra (73.1% coverage).
Valencian Community and Catalonia have the biggest deficit: new construction covers only 20% of their needs
The scarcity of new apartments and the rise in construction costs make its sharp price increase “not surprising”: buying a new apartment is now 35% more expensive than at the peak of the housing bubble in 2008, although when adjusting for inflation, it is still 1.8% below. These are homes that “better meet buyers' preferences due to their improved features, location, and higher energy efficiency,” the entity adds.
CaixaBank Research's report emphasizes the need to increase the supply of affordable housing. “Access to housing is already the second perceived problem, according to the CIS, and it not only affects vulnerable people but also large segments of the lower middle class and young people.” In their opinion, although there are no magic solutions, the only way is to enhance public-private collaboration, especially to promote rental housing. “The public sector must provide social housing, but it must seek ways to increase private investment, such as administrative concessions or the granting of surface rights because it does not have the financial capacity to address the housing shortage alone.”
Another issue in the sector, he added, is the lack of workforce that hinders producing all the housing needed. “Industrial construction is the great ally for affordable housing. It also enables attracting skilled and female labor and promotes more digital and sustainable construction systems.”
Despite the strength of the housing purchase demand, transactions, in Monturiol's opinion, have little room to continue growing. “The major markets, the provinces of Madrid and Barcelona, which account for 12% and 10% of the property sales closed in Spain, are at much higher activity levels than before the pandemic. And even though sales are slightly lower than those of 2023, they have no room to grow further.”
Monturiol pointed out that despite the rise in prices, there is no real estate bubble. “The debt of real estate companies is not high, and that of families has even been reduced. There is also no risk to the stability of the financial sector.”
