CBRE: New House Prices Are Soaring In Spain’s Large Cities

22 June 2017 – Idealista

New homes are becoming an “endangered species” in the real estate market in Spain’s large cities and along the coast. The increase in demand versus the shortage of supply means that prices are rising by more than the average growth rate of 4%-6% in capital cities such as Madrid and Barcelona, according to the forecasts published by CBRE for 2017. In addition, despite the greater increase in construction activity, the gradual rise in the value of buildable land is having an effect on the final price of new homes.

According to the residential report from CBRE for 2017, the average price of homes in Spain will grow during the course of this year by between 4% and 6%, although in some markets, such as in the large cities and along the coast, the increase in house values will be greater, given the demand-side pressure.

“Although the recovery in the residential market is not leading to significant tensions in terms of house prices at the national level, sharp rises are being seen in the price of new homes in certain local markets with high demand and a very limited supply of new homes”, said Samuel Población, National Director of Residential and Land at CBRE.

New housing is starting to become scarce in markets such as Madrid and Barcelona, as well as in areas along the coast such as Alicante and Málaga, despite the fact that the construction of new homes is being concentrated in these capital cities. The report warns that the current levels of construction are not going to be sufficient to absorb the demand for these types homes over the next two years.

CBRE calculates that this demand amounts to between 120,000 and 140,000 units per year, whereas in recent years, an average of around 51,000 homes have been completed per year. Moreover, the number of housing permits being granted still falls below the threshold of 80,000 homes per year.

“There is potential for the construction of new homes, given that the building rates for the next 2 or 3 years are unlikely to cover the entire demand”, explained Samuel Población. “The increase in the construction of homes in areas such as Madrid, Barcelona, Valencia, Costa del Sol, the Balearic Islands and País Vasco, is key to containing the inflationary trends in prices”, he added.

Controlling the increase in demand for buildable land

(…). According to data from the Ministry of Development, the average price of urban land in provinces such as Madrid, the Balearic Islands and Málaga amounted to 27%, 36% and 40%, respectively, of the historical series (which ranges between the maximum and minimum in the period 2004-2016) in the fourth quarter of 2016. “This suggests an intensification in demand for land in these locations”, said sources at the consultancy.

CBRE warns that in the last few months of 2016 and the first months of 2017, the market for land saw more activity and the number of transactions involving urban plots of land rose by just over 10% in 2016 with respect to 2015 (…).

Original story: Idealista (by D. Marrero)

Translation: Carmel Drake