The lack of supply triggers the price of new housing and gives way to a bubble

The trauma that caused the brick crisis is still very present in the minds of the Spanish. Its consequences dragged down all sectors and left short-term problems in the economy. The concrete skeletons and the abandoned cranes became one more element of the Spanish landscape as representation of the excesses committed. Fourteen years later, after a pandemic and a war in Europe that will last longer than expected, the ghosts of the past rear their heads.

The first was the explosion in demand, with a rate of buying and selling That’s a year not seen since 2007, and now it is the turn of the price of new construction, which has increased by 10.1% during the first quarter of 2022, growth that has not been seen since March 2019, according to projections by the National Institute of Statistics (INE). To get an idea, in the first three months of 2008 this experienced a rebound of 7.15%, when the market was already overheated. According to Tinsa’s projections, since the sector’s free fall decline peaked in 2015, both new and used have appreciated by 31% in the last seven years, and are already only 21% below of bubble levels.

The increase comes conditioned by the fact that the construction does not currently have the capacity to cover housing needs in Spain. Therefore, right now the problem that exists is a lack of ‘stock’ and not an excess of product. “During the confinement, savings bags were generated that, in part, have ended up being used for the purchase of a home. Front to this high volume of requests, the sector has not responded as quickly, which has contributed to the tightening of prices,” Tinsa’s spokeswoman, Susana de la Riva, told La Información. If you add to this factor the increase in the cost of raw materials and a scarce labor force, whose deficit reaches 700,000 professionals, the result is a more expensive final product.

In the last five years, experts have insisted that housing construction was at historically low levels. To develop some 800,000 per year in its heydaythe market began to move around 35,000-45,000 units between 2012 and 2014. Although this figure has tripled and has now moved around 96,000 each year, it seems not to be enough to break even , which is in the 150,000 houses. A figure that can be reached throughout 2022, if the volume of new construction permits maintains its speed. The Ministry of Transport, Mobility and Urban Agenda (Mitma) has processed in the three first months of the year a total of 28,165 units compared to the 23,783 managed in the same period of 2021, which translates into the best March since 2009, so if it maintains that rate, it could reach the forecast that is desirable for the sector.

The CBRE consultancy estimates that Spain has 228 million meters square meters of residential urban land to develop up to 1.4 million homes with a 20-year projection. In 2021, 4,300 million euros were mobilized on land, which translates into an investment of 34.8 million square meters. Despite this, they warn that the great obstacle is the lack of finalist land to cover all the existing demand at the present time and they already anticipate that inflation will make it difficult to build more homes in the medium term and will end up adding more pressure in the most stressed, because only 54% of the provinces they will be able to face more rises.

“The persistence of high inflation, which erodes purchasing power, and the increase in interest rates will foreseeably curb the demand that in the recent months I was ahead of operations to anticipate the rise in financing due to the increase in the Euribor”, says De la Riva, who argues that the imminent rate hike by the European Central Bank (ECB) will also make housing less attractive as an investment asset for the sake of other alternatives with higher profitability. In this sense, from Bankinter they foresee a moderation of the real estate activity after reaching maximums of almost fifteen years. Its latest report states that land transactions should stabilize throughout this year, even going back 20%, after the “strong release” of the main promoters. Specifically, they point out that the ‘rally’ of the IPC will lead to extreme caution in order to protect their margins in the future.

overheating of the sector pushes organizations such as the Bank of Spain (BdE) to warn that house prices are growing at a higher rate than in 2005 in the euro area and call for close monitoring of some real estate imbalances in the single currency area, due to the risk of transmission that can suppose for the Spanish bank. For its part, the Appraisal Society considers that the upward cycle of the average price of housing should end in 2023, in the event of fulfill the usual premise of eight years followed by growth. However, this time, the aforementioned variables could favor the stage being longer in time, both in new construction and in used housing, giving rise to more expensive homes, but with lower salaries than those of the ‘happy years’ ‘ of the housing boom.


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