Spain's housing construction falls 10.6% while prices hit record highs
Housing construction in Spain has dropped 10.6% while property prices keep hitting record highs. We look at the causes and solutions in the debate.
English · Original discussion in Spanish · Published
Construction slumps, prices don't: the property paradox
Certificates of completion of works fell by 10.6% in the third quarter, according to official data. Meanwhile, housing prices are at record highs. The paradox is obvious: why isn't more being built if demand is so high? There is no single answer, and the debate reveals conflicting views ranging from bureaucracy to mass immigration.
The numbers behind the paradox
The drop in construction is no accident: we have now seen nine consecutive months of declines in completed housing. Yet investment in renovations and extensions is growing by 25.6% year on year, reaching €643 million in the third quarter, driven by European funds. This suggests the sector is shifting towards rehabilitation, but the stock of new homes is not growing. On top of this, the existing housing stock is old: around 35% of homes were built between 1961 and 1980, and only 5% after 2012.
Lack of supply or excess demand?
One school of thought argues the problem is on the supply side: expensive land, bureaucracy and poor returns are holding back development. It asks why, if prices are so high, no one builds on urban plots that have been fenced off for years. Another view holds that demand has artificially surged due to mass regularisations of immigrants and the arrival of 'new Spaniards', creating unsustainable pressure. Some compare the situation with Cuba, where 60% of homes predate 1980.
Radical proposals for a broken market
In the absence of official solutions, the idea of boycotting the market has emerged: don't rent or buy even if you can afford it, to force prices down. The immediate reply: where do you live in the meantime? Moving back in with your parents or living under a bridge doesn't sound realistic. Others predict mass squatting and shantytown construction as the inevitable consequence.
The question nobody can quite explain is why, with record prices, there aren't more incentives to build. The answer probably combines supply and demand factors, but until the debate is settled, housing will remain a basic necessity out of reach for many.
Related debates in the forum
Certificates of completion of works fell by 10.6% in the third quarter, according to official data. Meanwhile, housing prices are at record highs. The paradox is obvious: why isn't more being built if demand is so high? There is no single answer, and the debate reveals conflicting views ranging from bureaucracy to mass immigration.
The numbers behind the paradox
The drop in construction is no accident: we have now seen nine consecutive months of declines in completed housing. Yet investment in renovations and extensions is growing by 25.6% year on year, reaching €643 million in the third quarter, driven by European funds. This suggests the sector is shifting towards rehabilitation, but the stock of new homes is not growing. On top of this, the existing housing stock is old: around 35% of homes were built between 1961 and 1980, and only 5% after 2012.
Lack of supply or excess demand?
One school of thought argues the problem is on the supply side: expensive land, bureaucracy and poor returns are holding back development. It asks why, if prices are so high, no one builds on urban plots that have been fenced off for years. Another view holds that demand has artificially surged due to mass regularisations of immigrants and the arrival of 'new Spaniards', creating unsustainable pressure. Some compare the situation with Cuba, where 60% of homes predate 1980.
Radical proposals for a broken market
In the absence of official solutions, the idea of boycotting the market has emerged: don't rent or buy even if you can afford it, to force prices down. The immediate reply: where do you live in the meantime? Moving back in with your parents or living under a bridge doesn't sound realistic. Others predict mass squatting and shantytown construction as the inevitable consequence.
The question nobody can quite explain is why, with record prices, there aren't more incentives to build. The answer probably combines supply and demand factors, but until the debate is settled, housing will remain a basic necessity out of reach for many.
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (29 replies).
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