The average price of new homes has continued to rise after last year’s uptick, with a notable year over year increase of 6.4 percent and a median of 2,809 euros per square meter in the latest Real Estate Industry Trends report. The report, produced by the Valuation Association, notes that ongoing rate increases and softer demand have not halted price momentum. In the latest update, prices for new houses remain below the peak levels seen at the end of 2007 when prices hovered around 3,000 euros per square meter, signaling a substantial but narrowing gap from historic highs.
Experts point out that the upward pressure on prices is largely driven by tight supply in new housing relative to demand. The association’s analysis indicates that while prices are still climbing, the pace has slowed compared with earlier periods, reflecting a cooling after a period of aggressive growth. In the regional breakdown, all areas reported annual gains, with Castilla-La Mancha at 3.4 percent and the Balearic Islands posting the strongest growth at 8.2 percent, followed closely by Madrid at 7.6 percent. These movements illustrate divergent local dynamics, where demand in popular destinations and major cities continues to outpace supply.
Nevertheless, the Valuation Association also notes a deceleration in the rate of increase across most regions. Excluding La Rioja, every autonomous community shows softer price growth than in the previous semester, with a less pronounced rise than in December 2022, signaling a broad-based trend toward stabilization in the market.
Construction costs rise 8.1 percent in the last year
In June 2023, the cost of building new construction reached 1,201 euros per square meter, marking an 8.1 percent year-over-year increase according to the report. The figure reflects ongoing pressures from higher material prices, labor costs, and supply chain constraints that have persisted into the current period. Quarter over quarter, there was a slight uptick of 1.6 percent, underscoring a continued but tempered escalation in development expenses. On-site costs vary by scope, with above-ground construction estimated at 966 euros per square meter and underground construction at 436 euros per square meter, highlighting a range of cost drivers across project types and geographies.
Real estate confidence index dips below the 50-point threshold
The Real Estate Confidence Index registered 47.5 points out of 100 in the second quarter, signaling growing caution within the market. This marked the end of a four-quarter stretch above the 50-point line, which previously indicated a stable or favorable sentiment. The dip aligns with broader macroeconomic volatility, ongoing inflation pressures, and a tightening monetary policy stance that continue to shape buyer and lender expectations in the sector. In the quarter, the index DeTrust fell by three tenths to 47.8 points, reinforcing the sense that market confidence remains fragile amid uncertain economic conditions and evolving fiscal policies.
Observers note that the malaise in confidence mirrors a broader climate of risk aversion, with buyers weighing high financing costs against expected appreciation, while developers reassess project viability in light of tighter credit conditions. Yet, a measured, if cautious, pickup in activity persists in pockets of the market where supply constraints are most acute and where strong demand sustains interest from both individual buyers and institutional investors. Overall, the latest metrics suggest that market momentum may be stabilizing, even as uncertainty remains a constant companion for decision makers in the real estate landscape.