The Spanish housing market remains firmly on the radar of international investors, although affordable rentals have taken a back seat. The spotlight is now on housing projects intended for sale.
This was the view expressed by Metrovacesa and CBRE during a real estate conference held as part of the 26th edition of the Madrid Real Estate Exhibition (SIMA).
According to Jorge Pérez de Leza, CEO of Metrovacesa and president of the Urban Land Institute (ULI), build-to-sell developments are currently at the forefront of investor interest. He described it as “the most powerful segment,” highlighting the need to meet the pent-up demand of hundreds of thousands of people. “It’s really very difficult to know what the true level of demand is,” he noted, adding that this uncertainty underpins the appeal of investing in such projects.
In his address, Pérez de Leza pointed out that one of the most attractive ways to invest in this segment is through joint ventures, which, he said, “offer greater control over the project.” He also emphasised that many developers and managers in Spain are keen to get involved.
Patricia García de Ponga, head of Living at CBRE Spain, also confirms that housing for sale is currently the main draw for international capital. She explains, “The fundamentals of the residential market are very clear. There is a significant gap between supply and demand, which is driving up house prices. Last year, according to our calculations, prices rose by double digits, and we expect a further 7% increase this year.” She added that “the figures are more notable” than in the build-to-rent sector, where some projects are shifting towards selling flats rather than leasing them, as originally planned.
During the session, the speakers highlighted that the for-sale housing market has been bolstered by rising interest rates in recent years, which have increased financing costs for investors and reduced the profitability of affordable rental developments.
“Affordable housing still faces a major challenge: profitability. With rising interest rates in recent years, investors have been hit hard. When you factor in construction costs, changes to building regulations, and those yet to come, it becomes less profitable than build-to-sell,” argued the CEO of Metrovacesa.
Meanwhile, Javier Ibáñez, partner in the Real Estate department at Eversheds Sutherland Spain, highlighted, “When international investors enter the market, they show interest in affordable rentals. They find affordable housing attractive, but as a second phase. Their primary focus is on build-to-sell projects through joint ventures. That’s where the opportunities lie.”
For Metrovacesa's CEO, the key to boosting affordable housing lies in providing some form of support, “whether through land, subsidies or a combination of both. Moreover, affordable housing needs vary between cities like Madrid or Barcelona and places like Pontevedra, though it is needed everywhere. That’s why public-private collaboration is crucial.”
"Build-to-rent is not a fad"
Another conference at SIMA specifically addressed the challenges facing the build-to-rent sector in Spain, particularly the current difficulty in securing profitable deals.
“Build-to-rent is a good fit, but it’s complicated. Out of every 20 to 25 deals we examine, only one succeeds,” said Rosa Gallego, CEO of Q-Living.
Despite obstacles such as rising financing, construction and land costs, heavy taxation and rent caps, the property sector stresses that build-to-rent is not a passing trend but a business “here to stay. The model isn’t going anywhere,” Gallego insisted.
For Mayra Llorens, Real Estate Account Manager at INTRUM, the market for new rental homes is driven by an imbalance between supply and demand for rental properties. “This environment is favourable for build-to-rent, despite regulatory uncertainty and price restrictions. In Spain, the need for rental housing is greater than in other countries. Demand is assured,” she explained.