The sprawling real estate bubble and its aftermath reshaped Spain’s economy and redefined the industry. Now, nearly fifteen years on, the landscape looks strikingly different. Industry leaders say they have become more professional, risk appetites have cooled, and demand for housing remains strong.

What indicators show that a housing bubble is not on the horizon?

Prices have not risen dramatically

From 1999 to 2007, the cost of housing in Spain climbed by an average of 12.3 percent per year. CaixaBank Research notes that although recent months have seen notable growth, these gains cannot be compared to the pre-crisis era, when the annual average stood around 2.3 percent from 2014 to 2022 [CaixaBank Research].

Over the last decade, the rebound has not restored national prices to their pre-crisis levels. Current data place prices roughly 8 percent below their 2007 peak, according to Idealista, with Tinsa estimating an even larger gap at about 18.7 percent [Idealista; Tinsa].

Housing affordability has tightened, but not to the same extreme seen during the boom years. Housing prices relative to family income have increased 5.4 times during the peak boom and have risen about 1.5 times in the last eight years [CaixaBank Research].

The sector is not producing enough housing

One key distinction between the pre-crisis market and today is the volume of new homes approved each year. Between 1999 and 2007, 5.65 million residences were greenlighted for construction, equating to 1.6 new homes for every existing one in Spain. Today that figure drops to 730,000 approvals from 2014 to 2022, about 0.9 new homes per existing dwelling [National Statistics Institute].

During the prior cycle, the crisis was driven by an oversupply of new homes. Currently, demand pressures are more acute. Major developers such as Neinor Homes and Aedas Homes have already booked roughly 70 percent of the units slated for delivery in 2023, with a similar picture expected for 2024. In Q3 2022, the four largest developers reported about 18,000 homes under construction, and more than 1,000 buyers had already committed to purchases [Industry reports].

The biggest difference from the pre-2008 period is the limited relevance of new construction to the market. For example, January 2007 statistics showed that about 40 percent of delivered apartments were unsold. In 2007–2008 monthly registrations of 20,000 to 25,000 newly built homes occurred, while in recent years the number rarely surpasses 10,000 [National Statistics Institute].

Household indebtedness has declined

Another contrast with the great crisis of the early 21st century is household debt. CaixaBank Research notes that, between 1999 and 2007, household leverage rose by about 40 percent relative to Spain’s GDP. From 2014 to 2022, it fell by around 20 percent, partly due to shifts in debt ownership. In 2008, leverage stood around 35 percent of GDP, while current levels sit above 110 percent [CaixaBank Research].

In 2007, housing loans exceeded 1.2 million. By 2022, the figure dropped to well under half a million. The year before the bubble burst, there were about 1.75 housing loans per sale; last year, that ratio fell to roughly 0.78 loans per sale, meaning two out of ten buyers financed a home without a loan [Market data].

Loan sizes have also shifted. In the previous cycle, loans commonly exceeded the purchase value. That practice ended soon after the peak, with around 15 percent of mortgages exceeding 80 percent of the transaction value in the past, now down to about 9 percent. These high loan-to-value products often targeted younger buyers with stable incomes but limited savings or guarantees [Financial data].

Financing structures have evolved: before the crisis, a small fraction of mortgages were fixed rate, but current figures show a surge to about two-thirds fixed rate. This shift reflects a period of abundant cheap money that made financing easier for many families, reducing sensitivities to central bank policy shifts [Mortgage market data].

Healthy companies

As the Spanish real estate recovery gained momentum, developers adopted more prudent debt practices. Leading Ibex-35 players Merlin Properties and Colonial maintain low debt levels of 32.7 percent and 36.9 percent, respectively, relative to asset value. Other big builders like Aedas Homes, Neinor Homes, and Metrovacesa report leverage in the 9–25 percent range [Company disclosures].

A notable market adjustment is the tightening of credit. Banks are far more selective about land financing. Developers now require substantial land ownership, extensive pre-sales, and proper permits before securing funds [Industry observations].

Moreover, large real estate groups and REITs have sophisticated financing structures. One reason for bankruptcies in the 2008–2012 period was long-term investments funded by short-term capital. Today, Merlin and Colonial rely on major bond issuances with tightly controlled maturity profiles [Industry reports].