Two new studies suggest that the price hike is directly linked to the shortage of new housing in Madrid and Barcelona
Madrid Nuevo Norte will contribute 10,500 dwellings to the capital’s stock, 20% of which will subsidised
The Ministry of Public Works has published the statistic report on appraised value of housing in Spain for the first quarter of this year. During this period, the average price of market-rate housing was €1,566.60 per square meter, which represents an increase of 2.7% over last year. Prices have been bullish for the last twelve quarters. It is therefore important to identify the factors contributing to this situation, especially in cities with strong demand such as Madrid and Barcelona, where the rebound is steeper.
The new 2018 residential report by the consulting firm CBRE warns that the surge in the price is still moderate, but strongly conditioned by the shortage of new housing in high-demand areas. According to this report, the lack of zoned land for development in Madrid and Barcelona is creating a significant bottleneck, which stems from moderate land zoning interventions.
The Appraisal Agency has also recently published a study on the new housing census, focusing on municipalities with over 50,000 inhabitants in the Autonomous Community of Madrid. This study also highlights the same phenomenon, which is even more acute in this region, and directly links the spike in prices to shortage of supply. “If new units are not put up for sale to absorb the growing demand, one could envisage a faster increase in prices, as witnessed in recent semesters,” predicted the Agency.
Regarding the existing housing stock, the report provides data that show that the rate of absorption is remarkable. Therefore, should this trend continue, the supply of new housing could be exhausted in about eight months, nine in the case of Madrid. Long gone are the days when stock far exceeded demand. According to the Appraisal Agency, 98% of new housing stock currently for sale in the capital has been on the market for less than two years. The CBRE study points out that the strong demand for second-hand housing nationwide is partly due to the limited supply of new housing.
Analysts stress the need for more zoned land for development to curb the rising prices in the city, as this would ensure the supply of housing in the medium term. This cannot be delayed given the lengthy timelines of urban planning and development procedures.
Along these lines, the pending approval of the Madrid Nuevo Norte project will provide land to build 10,500 dwellings, of which 20% will be subsidised, a percentage that is double the amount required by law. This means that the north of Madrid will offer new housing to meet the high demand in the area, contributing to curbing the rising costs of housing in the area.