Housing shortages are fueling dramatic price increases in some of Europe’s major cities, and Madrid is now leading the pack with a jump of almost 11% year-on-year.
Even with interest rates at multi-year highs, residential property is booming in the Spanish capital, according to the Bloomberg City Tracker, driven by locals desperate to get on the housing ladder before they are completely priced out and investors looking for returns.
Madrid has been particularly affected by an influx of Latin American money, exacerbating the squeeze on the market, as well as hype about certain districts. Carabanchel, traditionally a working class area, was named the third coolest neighborhood in the world last year. New house building is at historical lows, there is little urban land available for construction and few plans for new developments. Housing stock has fallen 11% in the last year, according to real estate website Idealista.
With so few properties available, sales fell 8% in the first quarter, according to the statistics office.
“An increasingly large housing deficit is accumulating,” said Beatriz Toribio, head of the Association of Builders and Developers of Spain. “Madrid is a very important economic hub and more and more people are coming to work and live in the city. Add that to the tourism pull, the cultural pull. The demand is increasing.”
Toribio wants more done to reduce bureaucracy and labor shortages, and says the government also needs to develop a long-term vision for housing.
Separate data from the Land and Property Registry show a similar trend in the Madrid province. Prices for new builds surged 14.5% in the first quarter of 2024 compared with the previous three months. In a Knight Frank index of prime properties, Madrid was the top-ranked European city in the first quarter.
To capture the latest housing-market trends in European cities, Bloomberg compiles figures from a range of providers. Some are asking rates and indicative levels, while others are official figures on transactions. Madrid prices are published or compiled by Idealista.
Madrid is the only city in the Tracker with prices rising at a double-digit pace. They increased 10.6% in April compared with the same month a year ago. When Bloomberg last highlighted the city, in the summer of 2023, the gains were around 5%.
Athens is up 9.6% year-on-year, slipping below 10% for the first time in 17 months. Apartment prices in Vienna registered gains of just over 7%, staying at the fastest since October 2022.
Prices are falling in only three out of the 12 European cities monitored. Paris was the worst performer, with a 7.5% decrease.
In Madrid, Elena Jori, director of real estate at agency Home Select, said the supply-demand imbalance means she expects prices will keep rising, and she also downplayed the risk of a property collapse.
“The current market has nothing to do with the one that caused the crash in 2008,” she said. “There is neither an excess housing stock, nor is financing cheap. We are precisely talking about a shortage of product.”
