The Lack of New Housing Construction in Spain: Impact and Outlook for the Real Estate Sector

In recent years, Spain has experienced a notable slowdown in the construction of new homes, which has raised alarm bells in the real estate sector and poses significant challenges both in the short and long term. This phenomenon, which directly affects the supply of housing, not only has repercussions on prices and access to housing, but also influences the country's overall economy and its competitiveness within the European Union.

Current Situation in Spain

Over the past decade, Spain has seen a significant reduction in the construction of new homes. According to data from the Ministry of Transport, Mobility and Urban Agenda, in 2023 licenses were granted for approximately 100,000 homes, a figure that, although higher than the hardest years of the 2008 crisis, is still well below pre-real estate bubble levels. To put this into perspective, in 2006, the peak of construction, permits were granted for more than 700,000 homes.

This decline in construction is due to several factors. Among them, economic uncertainty, rising costs of materials and labor, and the lack of available land in large cities have been decisive. In addition, urban planning regulations, often complex and restrictive, have made it difficult to launch new projects, especially in metropolitan areas where demand remains high.

Comparison with Other Countries of the European Union

The lack of housing construction is not a problem exclusive to Spain, but the impact has been more pronounced compared to other countries in the European Union. According to Eurostat data, in 2022, Spain built approximately 2.1 new homes per 1,000 inhabitants, well below countries such as Germany (3.6 homes per 1,000 inhabitants) and France (5.2 homes per 1,000 inhabitants).

Countries such as Poland and Sweden also outperform Spain in this area, with much higher construction rates. In the case of Sweden, for example, the policy of promoting the construction of affordable housing has allowed it to maintain a relatively stable supply. In Spain, on the other hand, low construction is generating an imbalance between supply and demand, which has led to an increase in housing prices, both for sale and rent.

Long-Term Effects on the Real Estate Sector

1. Increase in Prices

One of the most immediate and visible consequences of the lack of construction is the increase in housing prices. According to the INE Housing Price Index, in 2023 prices rose by 5% year-on-year, with regions such as Madrid and Barcelona reaching increases of more than 8%. This increase in prices is largely due to the shortage of supply in the face of a demand that remains strong, especially in large cities and tourist areas.

If this trend continues, prices could continue to rise in the coming years, making access to housing even more difficult, especially for young people and the most vulnerable sectors.

2. Accessibility Problems for Young People

The lack of new housing directly affects accessibility for younger generations, who already face a precarious labour market and low wages. In Spain, the average age of emancipation is one of the highest in Europe, standing at 30 years, well above the European average of 26 years, according to Eurostat data. This delay in emancipation is largely due to high housing prices and the lack of affordable rental alternatives.

3. Change in Demand: Rise of Rentals

Faced with rising housing prices and the lack of new construction, more and more people are opting to rent rather than buy. This is driving the rental market boom, which in some cities such as Madrid or Barcelona already represents more than 30% of the total occupied homes, according to Idealista data. However, the lack of new homes is also affecting the rental market, where prices have experienced considerable increases in recent years.

4. Impact on the Economy

The construction sector has traditionally been one of the driving forces of the Spanish economy. The lack of investment in new homes not only affects the supply and demand of the real estate market, but also has repercussions on other related sectors, such as employment, the construction materials industry and bank financing. In macroeconomic terms, a stagnation in construction could limit GDP growth and economic development in the coming decades.

What Solutions Exist?

To address the shortage of new housing construction, both the private and public sectors need to take action. Some possible solutions include:

Fiscal and Financial Incentives: It is essential that the government and local administrations offer incentives for developers who build affordable housing. These could include tax reductions or ease of obtaining permits.
Improving Urban Planning Regulations: Simplifying administrative and urban planning procedures could speed up the pace of construction, especially in areas with high demand.
Promoting Social Rental Housing: Investing in affordable rental housing, both by the public and private sectors, is key to balancing supply and demand in a market where access to housing is increasingly restricted.
Use of New Technologies and Sustainable Construction: Innovations such as modular construction or the use of sustainable materials can help reduce construction costs and times, making new projects more viable.

Conclusion
The lack of new housing construction in Spain is creating a series of challenges that will impact the real estate sector in the coming years. If measures are not taken soon, the consequences will be more evident: higher prices, difficulties in accessing housing, and a possible economic slowdown. Compared to other countries in the European Union, Spain is lagging behind in terms of new housing production, which accentuates the need to act in a coordinated and effective manner to guarantee a more balanced and sustainable real estate market.