The Bank of Spain now estimates that the country has a shortfall of 700,000 homes, something it warns could become a “bottleneck” for the economy.
A combination of dwindling market supply and increased post-pandemic demand, especially among foreign buyers, has sent prices soaring in both the rental and purchase market in recent years.
Now the Bank of Spain has warned that the country needs more than 700,000 homes to meet the accumulated demand from new households that have been created in recent years, updating previous forecasts.
However with rising rents and a shortfall of hundreds of thousands of homes in Spain, experts warn that red tape and bureaucratic backlogs mean the problem won’t be solved without reform.
READ MORE: ‘Red tape takes longer than building homes in Spain’
The bank’s analysis frames the housing crisis as no longer just a problem for young Spaniards wanting independence and to put a foot on the property ladder, but also as a potential wider threat to the Spanish economy.
The Bank of Spain has stated that, in the current market context, “this shortage of housing stock to cope with the high rate of household creation could become a bottleneck for the economy”.
Market analysis from Caxia bank states that “housing demand has undergone a rapid revival since mid-2024 and is at levels not seen since 2007”.
The country’s central bank, however, has ruled out another housing bubble, though officials warn about price rises being unequally distributed around the country, noting “significant price dispersion, with some regions growing less and others under more pressure”.
READ ALSO: Bank of Spain rules out property bubble but warns of uneven price rises
In the last four years, Spain’s housing deficit has increased sevenfold, with 50 percent concentrated in Madrid, Barcelona, Valencia, Alicante, Málaga, and other provincial capitals, and projections warn that the situation will continue to worsen.
In 2024, the Bank of Spain made forecasts on the number of homes to be built in Spain in order to balance market supply and demand. A deficit of 600,000 new homes was established.
Now that number has been raised by 100,000 homes, according to the bank, meaning 700,000 homes are now needed.
José Luis Escrivá, governor of the central bank, said at a recent meeting held at the General Council of Economists, that ‘after accumulating a deficit of more than 400,000 homes in 2022-2024, provisional estimates for 2025 point to an additional deficit that could exceed 100,000 homes'”.
The largest increases in housing prices occurred in the second quarter of 2008 (€2,095.7/m²) and in the first quarter of 2008 (a record €2,101.4/m²).
