About 41% of home and property builders, whether residential or non-residential, already face non-payment risk driven by rising interest rates. Data from Insight View, an Iberinform platform, show this indicator has worsened by two percentage points versus 2022. The industry is feeling the toll of a sudden sales slowdown caused by higher mortgage costs. Slower demand, tighter bank lending, delayed construction permits, and shifting prices in building materials are forming a volatile mix that compresses trade margins and compounds a sector used to navigating tough times.
Recent macroeconomic signals reinforce the trend of weaker investments in construction. The sector contracted by 2.2% in the latest quarter compared with the previous three months. The most pronounced drop occurred in non-residential construction, down 3.3%, with residential construction also shrinking, by 0.9%.
Rising interest rates remain the leading driver behind the pause in real estate activity. After a sequence of rate hikes, and despite a pause approved by the European Central Bank, financing costs have climbed quickly. Signs of pressure include noticeable discounts on housing listings across some real estate portals. Homeowners carrying substantial mortgage burdens are feeling the strain.
Among the six largest provinces by market size, the Balearic Islands show the sharpest deterioration in credit risk, affecting about 60% of construction firms, eight points higher than a year earlier. Malaga registers 54%, Madrid 45%, Valencia 44%, Barcelona 41%, and Alicante 38% in the same metric.
Iberinform’s analysis also highlights that 51% of sector companies are under ten years old. The report notes that age is a meaningful factor in credit risk, with 50% of the youngest firms in the top decile showing high or maximum default risk. By contrast, firms aged 11 to 25 years exhibit a much lower default rate at 31%, and those aged 25 and older sit around 29%.
Lead times, representing the number of days inventory sits on hand, have shortened markedly—from 434 days in 2013 to about 127 days today. The data also reveal a highly atomized sector, with micro and small businesses accounting for roughly 96% of the market. Trading margins have fluctuated, moving from 4.7% in 2019 to 3.4% in 2022, with expectations of further compression into 2023.