The costs of new homes in Barcelona had not increased to double digits since a little before the real estate bubble burst in 2007. But this has changed recently, as the new ones have increased their value by 10.6% in the first 6 months of this year. In the case of Madrid, the annual increase was 8.5%, almost double that in other parts of Spain.
Why do prices rise so fast?
According to the consultancy company Sociedad de Tasación, the disproportionate increase in the price of new housing in Spain is mainly influenced by the price increase in Madrid and Barcelona. This means that there is unequal growth throughout Spain.
According to the consultant, price variations in most cities in Spain are not very significant. However, this is not the situation in Madrid and Barcelona which have a much larger growth than the rest of the cities and at this rate their increase could reach the levels seen in 2007.
This is reflected in the market, since in the first part of 2018 the average price of a new house in Spain increased by 2.6% in provincial capitals, reaching even 2,290 euros per square meter. Currently, a new house of 90 square meters in a provincial capital can cost about 205,000 euros. On the other hand, in other cities houses barely cost 1,600 euros per square meter, much less than in the capital cities.
Another possible explanation for the increase in the new housing price is the insufficiency in the offer of these properties in comparison with the great demand from families, private individuals and investment companies that exist in these localities. So much so that the need to acquire a new property in these cities has caused the increase in the price of second-hand properties to barely grow by 0.7%, compared to 6% of new construction, according to data from the notaries.
The consultancy also indicated that in large cities there is a large number of new houses that go into the hands of national and international investors whose purpose is to use them for rent. The rent is a productive business for the investors, but doing so keeps the pressure on the prices of the big cities.
Increase in the metropolitan area
The behavior of the growth rate in the new housing price of large cities such as Barcelona and Madrid is already affecting all metropolitan areas. In the case of Madrid, the western zone has hit its highest growth, reaching 7%. In Barcelona there is a more uniform growth in its metropolitan area with an increase of 7% in general.
Other cities with large increases in the prices of new homes are Palma de Mallorca, Zaragoza and Granada, with an increase in prices of 5.3%, 4.6% and 4.4% respectively. The Autonomous Community of Catalonia has an average price of 2,589 euros while in Madrid it is 3,293 euros.