Demand, the great strength of new construction housing in 2024
The economic situation was not the most favorable in 2023 for the real estate market. However, the figures from new housing paint a different picture. Currently, the demand for new construction remains much higher than the supply, favoring developers. According to experts, this strong demand is undoubtedly the greatest strength of new construction housing in 2024.
This imbalance could intensify in the next two decades if the current levels of new housing construction are maintained, as predicted by the “Residential Market Analysis in Spain: Trends and Challenges for 2024” study recently presented by the Sociedad de Tasación (Appraisal Society). The real estate asset valuation company points out that the construction of homes will vary between 80,000 and 100,000 units per year. This figure is still insufficient to accommodate the 200,000 new households that will form annually in the next 20 years.
Regarding prices, the general sentiment among major developers is that we will not witness a decline in prices for new construction housing in 2024, nor in the short or medium term. The consistency of demand and the lack of quality supply keep the price of new construction at similar levels, so no significant variations are expected. According to Sociedad de Tasación, the housing price is approaching an inflection point, with a general upward trend and a slowdown in the growth of average prices. According to their estimates, this trend will continue to rise during the first half of 2024 – a growth of 4.1% is expected in the first semester – although at a slower pace, and sales times will extend.
Major developers, key drivers of new construction housing in 2024
In this context of rising prices, major developers confirm, through their figures, the positive prospects for the sale of new housing.
The company currently has over 4,650 homes under construction, thanks to the boost it has given to new construction in recent months. According to statements to Okdiario, the developer assures that the rise in interest rates has not affected the sale of this type of property so far. They add that they continue to experience high demand in residential areas and have positive expectations for deliveries scheduled for the period 2023-2025.
The enthusiasm for new housing is depleting the stock of some developers even before completing their projects. This is the case with Kronos Homes, whose sales range before completing the works is between 70% and 90% in cities like Madrid, Barcelona, or Valladolid. The developer’s goal is to deliver between 1,200 and 1,500 new construction homes, generating annual revenues of between 600 and 650 million euros.
As of September 30, they have already launched 97% of the homes that will be delivered in 2024-2025 and 89% for 2025-2026.
They will launch at least two developments during 2024, with an estimated volume of around 400 homes.
The developer plans to deliver around 1,000 homes in 2024, a figure well above its usual average, and will start construction in Madrid, Galicia, or Palma de Mallorca.
To boost the sale of new construction housing, Neinor Homes and Urbanitae have recently created a joint venture through which they will invest up to €150 million in the development of new construction homes for sale.
Scarcity of land
However, not everything is smooth sailing for the housing market. In this regard, the scarcity of final land is, along with the rising construction costs, the main cause of the deficit in new construction housing, which is necessary to meet the growth of large cities.
Spain has been grappling with this issue for some time, which is why the sector has been demanding solutions from different public administrations to unlock the situation. Developers like Culmia insist that if the management of land is not expedited, the problem of housing prices or access to housing will remain a point of tension in many areas of the country. Madrid and Barcelona, the two largest metropolitan areas, have land under urban management for just over 200,000 new homes in the coming years, a volume that the developer considers completely insufficient.
Rise of crowdfunding as a financing method
When we talk about new residential development, financing is always a key aspect, and in Spain, the majority of that contribution still falls on banks. However, in recent years, the restriction on bank credit has been increasing.
In this scenario, participatory financing models like the one developed by Urbanitae emerge as a solid alternative to bank financing. Crowdfunding has demonstrated its ability to provide liquidity in large real estate projects, contributing to the increase in the stock of new construction residential properties. Thanks to the funding obtained through its projects, Urbanitae has participated in the development of more than 7,500 properties, including homes, commercial spaces, storage rooms, and parking spaces.