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 Spanish government’s misguided housing policy has created a supply crunch on new build properties. This has triggered an affordability crisis whose consequences are yet to unfold.

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 spiralling out of control. Price bubbles are not good, and an overheated real estate market leads to dire financial and social problems as witnessed in 2008.

The Spanish government must take decisive action to cool down the prices on new builds by dramatically increasing the supply of housing stock. It could achieve this by:

allowing developers to build more properties by reducing the ludicrous admin red tape
foster an ambitious nationwide construction program of state-subsidised property for those on low or precarious incomes (social housing or shareholders)
approve audacious tax breaks for taxpayers with mortgage loans over extensive periods i.e. 20 years
public administrations need to release their iron grip on land and liberalise it
the government, and all regional administrations, must reduce the taxation on housing which severely impacts on the final asking price buyers pay. Public administrations must cease viewing and treating land as their own private piggy bank to finance themselves at the expense of property buyers

The above measures would raise the stock supply to match, or close the gap, with housing demand, dramatically bringing down house prices across the board.

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 collateral. These mortgages will act like millstones around borrowers' necks, dragging them down, and tying them financially to a house which is not worth what they are paying for.

This is a very concerning and pressing matter that can only be handled by decision-makers at the highest level. Resolute action is required without further delay.

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

Source: ABC

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