According to Sociedad de Tasación, an independent appraisal company, by the end of the third quarter of 2022, prices for new buildings in Madrid will continue to grow with an increase of another 7.8%, reaching 3,968 euros per square metre. One of the main reasons for the price rise is the inflation crisis, which has resulted in rising prices for all goods and services, including energy and construction materials, without speaking about the cost of labour.
In fact, the last point is the most deficient commodity in the modern Spanish labour market, which has an impact on the pace and quality of new construction. It takes longer for good new properties to hit the market. They are more expensive, and they are few.
Regardless of how expensive they are, there is such a huge demand that even the most expensive options run out, which worsens the shortage and drives up prices. In the first three quarters of 2022, sales in the Spanish capital reached over 100,000 transactions due to this enormous demand, which surpassed all expectations.
According to Pablo Bruguier, commercial director of ASG Homes, a Spanish developer, the residential property market in Madrid is currently experiencing a very interesting period in terms of profitability. The local market is extremely uneven. Prices and supply volumes on the local market vary greatly from region to region.
In the capital’s central districts, there is a severe housing shortage, although in the suburbs, situations are much more stable. The local market is strong, as seen by a consistent record of 100,000 real estate transactions, but this result has come at the expense of worsening shortages in several Madrid areas.
Raimundo Giménez, chief Territorial Delegate for Aedas Homes, shares a similar opinion to Pablo Bruguier: “Madrid is the nation’s market leader. It has a solid customer base that keeps demand at a constant level. Indicator growth rates are higher than the national average at the macro level. Supply is not keeping up with demand.”
Raimundo Giménez adds that although the city’s population has risen by 12% to 750,000, new home sales are now 30% lower than they were in 2006. This was the period when the market was at its height. Madrid strives to be a major European capital like Paris or London, but a lack of resources is limiting its potential.
Ignacio Gómez, Territorial Director of Neinor Homes, defines the market for new buildings in Madrid as the most important real estate market in the country. He emphasises that homeowners in Spain and other nations are most interested in the capital city. It will have a massive effect on the Spanish economy’s future, in part because it will be strong against short-term macroeconomic changes in both Europe and the rest of the world.
Additionally, Madrid serves as a showcase for everything the country has to offer foreign investors, visitors, and expats. There are also the largest funds, real estate developers, and private investors. However, it requires care from both market players and the authorities. As a result of this cooperation, developers get a lot of help from the government, both at the national and local levels, including the Madrid City Council. They have made the decision to speed up the process of issuing new construction permits to companies. However, such steps should only be the beginning.