Residential Construction in Spain Remains Slow Despite Price Increases and Sizeable Demand

Strong demand for residential housing and a low supply of newly built stock have put upward pressure on housing prices in Spain for many years, with construction companies unable to meet the rising demand. Despite these challenges, we believe the national government will introduce changes to successfully increase housing supply and therefore help address Spain's housing challenges.

Key highlights include the following:

-- Increasing competitiveness, a lack of skilled labour, and rising operational costs are pressing profitability for Spanish residential construction firms.
-- Increased adoption of industrialised construction, an efficient alternative to traditional construction, should support growth.
-- A lack of developable land limits housing supply but improved public-sector coordination may boost production capacity.

"In the near term, we expect modest growth in the residential construction sector to gradually meet high housing demand," said Laura Gutierrez, Assistant Vice President, European Corporate Ratings. "However, the overall rate of growth will largely depend on the scale of the regulation changes allowing urban planning procedures in Spain to be more efficient."