The Spanish housing market is grappling with a substantial deficit of approximately 750,000 homes, a situation that has persisted since 2021, according to a report by the mortgage fintech Gibobs.com. This shortfall highlights the widening gap between residential demand and construction capacity, exacerbating accessibility issues for many across the country.
During the first half of 2026, 112,801 new households were formed, while only 91,896 homes were completed throughout 2025. This figure represents about a third of the 280,000 homes annually estimated by the Bank of Spain as necessary to meet demand. The ongoing imbalance is not a temporary issue; insufficient construction over the past five years has led to an accumulating deficit, making it increasingly difficult to restore equilibrium between supply and demand.
Rising housing prices
The pressure on the housing market is reflected in rising prices. The average recorded price of housing reached €2,487 per square metre, marking a year-on-year increase of 9.2%. Factors sustaining demand include employment growth, mortgage financing, and the presence of foreign buyers, who account for roughly one in six real estate transactions in Spain. In regions like Alicante, foreign purchases make up nearly half of all transactions, while in Málaga, they exceed a third.
Additionally, the financial burden on households seeking to purchase a home has increased. In the first quarter of 2026, the mortgage effort required from buyers reached 36.1% of their income, surpassing the one-third threshold of family income. Jorge González-Iglesias Baeza, CEO and co-founder of Gibobs.com, explained, "When only one in three homes needed reaches the market, buyers compete for the available properties, and that competition drives up prices."
Soaring land prices
One of the main obstacles to increasing residential construction is the rising cost of land. In the second quarter of 2026, the average price of urban land reached €207.8 per square metre, a 15.3% increase from the same period the previous year and the highest level since 2011. This rise is compounded by lengthy administrative processes required to develop new projects. The report indicates that obtaining urban planning permits can take at least 18 months in Valencia and the metropolitan area of Madrid, while in municipalities with fewer than 50,000 inhabitants, the most optimistic timelines are around six months.
These delays contrast sharply with the speed at which new developments are sold in high-demand areas, where homes can be sold in as little as three to six months. The combination of expensive land, limited available product, and long administrative timelines restricts the sector's ability to respond to residential needs.
Insufficient housing construction
Promotional activity indicators show some potential for growth, but still fall short of closing the deficit. In 2025, 139,016 homes were approved for construction, and 137,330 were initiated, according to ministerial data collected by Gibobs.com. However, the number of homes actually completed remained below 92,000. This discrepancy highlights the time lag between planning a project, starting construction, and final delivery.
In addition to urban planning obstacles, developers face significant financial requirements. Bank credit for real estate promotion grew by only 1.3% during 2025, according to the Bank of Spain's data. Financial institutions typically require a substantial portion of homes to be sold off-plan before granting funding, with pre-sale percentages ranging from 40% to 80%. Furthermore, bank financing usually covers only 55% to 65% of the project's cost, forcing developers to contribute the remaining capital.
Alternative financing gains traction
In light of these challenges, alternative financing is emerging as a viable option to accelerate the development of residential projects. Although it comes with higher costs than traditional bank loans, it allows developers to secure funding without needing to achieve specific sales levels beforehand. According to Gibobs.com, alternative developer loans in 2026 presented nominal rates between 9.5% and 13.25%, with opening fees ranging from 2% to 7.5%. The annualised financial cost thus falls between 11.5% and 15.1%. This increased agility may be particularly appealing for developers managing multiple projects simultaneously, although the higher financial cost must be considered when assessing project profitability.
A structural challenge for the Spanish housing market
The housing deficit has become one of Spain's primary economic and social challenges. The creation of new households continues to outpace the completion of homes, while construction costs, land prices, and administrative procedures hinder a swift response. Gibobs.com's report emphasises the need to improve conditions that facilitate the transformation of residential projects into available homes, from urban planning processes to access to financing. Without a sustained increase in supply, the market will remain vulnerable to heightened competition among buyers and further price pressures, particularly in cities and metropolitan areas where demand is most intense.
