Moscow: Bank of Spain warns of half a million unsold homes, lack of land developers leads to high prices

The Bank of Spain study recommends that the government "review procedures for managing land for construction" to try to reduce the cost of housing in Spain, a high cost it attributes to a "mismatch between supply and demand".

The study "The mismatch between housing supply and demand and its relationship to prices", conducted by Lucio San Juan, an analyst at an issuing bank, and published in his latest Boletín Económico, indicates that the Spanish real estate market is characterized by a lack of supply and strong demand, both of which have worsened since the pandemic, offsetting any price reductions that may be caused by rising interest rates.

The study attributes the resistance to falling prices, on the demand side, to the buyer profile, which it defines as "high-income, middle-aged (30 to 49 years old) and higher-educated families" who accumulated savings during the pandemic. This effect will be amplified in the coming years because of the increase in the number of households due to rising immigration.

On the other hand, the study also highlights that prices are rising due to limited housing affordability, which also remains tight in the short term, as well as due to increasing material and labor costs.

According to the issuing bank, the mismatch between supply and demand improved during the pandemic, which was temporarily reflected in lower prices because housing supply increased due to a rise in the number of legacy home sales (which reached an all-time high in 2021), while demand declined due to travel restrictions that reduced purchases by foreigners.

After Covid, however, demand increased and purchases by foreigners soared (they were 40% higher in 2022 than in 2019) because purchases for second homes joined those who settled in Spain for remote work, while national buyers looking for different homes (larger and with open spaces) increased.

At the same time, supply has fallen due to a drop in housing construction - which was already low before the pandemic - because building work was temporarily suspended during the self-imposed isolation and visa processing was delayed.

In addition, the study notes that supply is also declining due to an increase in the number of owners who choose to use their homes for tourism from 2021. The Bank of Spain study emphasizes that there is a stock of around 450,000 unsold new homes dating back to the housing boom times and that it has hardly decreased since 2018, which is explained by the fact that it no longer meets the preferences of today's buyers due to its location or lack of the larger size, open spaces and energy efficiency currently required.