Housing crisis
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Clara Alba
Madrid
Friday, 2 August 2024, 17:44
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There is no ceiling to the current house-buying market in Spain. Despite the fact that property prices in many regions are already at bubble-bursting highs, the huge mismatch that still persists between supply and demand will continue to stress the market this year. This is the main conclusion of a study by BBVA Research, in which the analysts predict that house prices will rise another 5% across the country this year, with another 4.7% increase next year. All this on the back of the 3.9% rise in 2023 and the 4.3% rise that has already happened in the first quarter of this year.
Such an upward cycle means that the effort to access housing now stands at around 30% of personal income being spent on somewhere to live, with several regions in Spain exceeding 35% such as the Balearic Islands, Basque Country and Madrid.
Experts from BBVA's research department anticipate greater demand amid a stronger economic climate, with a forecast of growth in property sales of around 5% this year, "which translates into a volume of 675,000 units", and around 3% in 2025, up to almost 700,000 homes. The pent-up demand from young people and the influx of foreigners are very much behind these forecasts.
The BBVA report also acknowledges that there will be a notable increase in supply that, in any case, will not be able to cover all the demand. Specifically, BBVA Research expects that by 2030 the Spanish population will be just over 52 million people, that's 3.5 million more residents and 2.1 million households. "This demographic increase, taking into account the average household size [now decreasing], would mean the need for between 1.4 and 2.1 million homes," they warned.
It is true that the lull in building permits experienced in 2023, when barely 0.5% more were granted than the previous year, has now been reversed. To be precise, between January and May 2024 building permits increased by 14.8% compared to a year ago. Nevertheless, although the growth rate is significant, "the level is still relatively low", said the report's authors.
In these first months of 2024 only 10,500 houses on average per month have started to be built. "The lack of available land, the shortage of labour and the regulatory uncertainty are conditioning the start-up of new projects," the report stated.
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