Spain's new property bubble: New builds are 44% more expensive than resale properties

Raymundo Larraín Nesbitt, May, 1. 2025

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By Raymundo Larraín Nesbitt
1st May 2025

The government’s misguided housing policy has created a supply crunch on new build properties.

This has caused new builds to soar in price by two digits a year, fuelling a new property bubble. In this case, it is justified because housing demand far outstrips supply by 500%. This shortage in new housing stock has led prices on new builds to skyrocket, leading to annual appreciations of two digits!

Spain builds under 100,000 new homes a year, when the real demand is well over 500,000. This stock shortage translates into a price hike with no signs of abating in the mid-run. As land takes many years to develop in Spain, we can expect the house price boom to continue unabated over the next 3 to 5 years.

This is creating serious problems for buyers, particularly amongst native households on precarious or low incomes, who cannot afford to access new property at these prices which far exceed Spanish wages.

The government must revise and backtrack on its housing policy immediately to reverse a situation that is now out of control. Price bubbles are not good, and an overheated real estate market leads to major financial and social problems as witnessed in 2008.

The Spanish government must take decisive action to cool down the prices on new builds by allowing developers to build more properties (or foster the construction of state-subsidised property) and raise the stock supply to match, or at least close the gap, with housing demand as much as possible.

This rise in new build asking prices is not sustainable long term, and is already leading to future problems. Spanish borrowers are already moving into 30-year plus mortgage loans, which spells for disaster given the overvalued valuations of the collateral.

It seems the Spanish government learnt nothing from the 2008 property collapse.

Source: ABC

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