What happened
Housing prices in Spain have risen by more than 40% since the end of 2020, far exceeding general inflation growth, which stands at around 20%, according to Libertad Digital. Despite this increase, construction of new homes remains stagnant, without reaching pre-housing-bubble levels.
This phenomenon is due to a structural bottleneck on the supply side, caused mainly by urban planning regulation, the sector's low profitability and rising construction costs. According to the report from the Centro Ruth Richardson de la Universidad de las Hespérides, the average profitability of construction in Spain is negative, placing it in the 13th percentile of net profitability.
The artificial scarcity of buildable land is one of the main factors limiting construction. According to the report, 95.7% of Spanish territory is classified as non-developable land, which restricts the construction of new homes to just 2.1% of the territory in the short term.
Why it matters to a construction company
This context directly affects small and mid-sized construction companies, which find it increasingly difficult to start new housing projects. The limited supply of buildable land and the sector's low profitability significantly reduce business opportunities, especially in a market where housing prices keep rising.
In addition, rising construction costs, which have doubled in real terms over the last two decades, add further pressure. This is partly due to regulations such as the Código Técnico de la Edificación and energy efficiency standards, which have structurally raised costs.
The practical consequence is a strained market where supply cannot meet demand, which could lead to greater housing exclusion. Construction companies must navigate this complicated environment, looking for ways to keep their projects viable despite the restrictions.
What changes in day-to-day site work
In the day-to-day running of a construction site, project management becomes more complicated because of land restrictions and the need to comply with increasingly strict regulations. Construction companies must devote more time and resources to planning and obtaining permits, which can delay the start of work.
Pressure on budgets is constant, as material and labor costs keep rising. This forces construction companies to be more precise in their quantity takeoffs and payment certificates to avoid cost overruns that could compromise the project's viability.
The first to notice these changes are site managers and planning managers, who must adapt their strategies to comply with regulations and optimize the use of resources in an increasingly challenging environment.
Specific cases
One specific case is a construction company that tried to develop an affordable housing project in a high-demand area. Despite having a solid plan, the lack of buildable land and high construction costs made the development unviable.
Other companies have chosen to focus on renovating existing buildings, a strategy that allows them to get around some of the restrictions on developable land. However, this also brings challenges, such as adapting to energy efficiency regulations that can increase costs.
For a strategy to work, it is crucial to have a team that understands the regulations well and can identify optimization opportunities at each phase of the project. Collaborating with experts in urban planning and energy efficiency can be key to success.
Data and context
According to Libertad Digital, the Spanish urban planning system concentrates almost total control over land development rights in the Administration. This means that any change in buildability or land use requires lengthy administrative processes, which can last between 10 and 15 years.
The fit with the sector's trend is clear: construction of new homes has not rebounded and remains at historic lows in terms of housing starts per 1,000 inhabitants. Housing investment represents only 5.6% of GDP, less than half of the peak reached in 2006.
However, the data do not show the whole problem. Outdated urban plans and the lack of skilled labor are other factors that contribute to the sector's stagnation, complicating the situation even further for construction companies.
Risks and limits
Costs and deadlines are a constant risk. Doubled construction costs and long waits to obtain permits can make some projects unviable. Construction companies must carefully assess the risks before embarking on new developments.
In some cases, it does not pay off to start new projects because of the sector's low profitability. Construction companies must consider whether the return on investment justifies the risk and the resources needed to comply with regulations.
Organizational risks are also significant. The lack of skilled labor and the need to comply with complex regulations can affect a construction company's ability to complete projects on time and within budget.
What a company can do now
Companies can start by carrying out a thorough feasibility analysis of their projects, taking into account land restrictions and construction costs. It is crucial to identify optimization opportunities and seek expert advice on urban planning and energy efficiency.
Decision criteria should include an assessment of potential risks and benefits, as well as the company's ability to adapt to current regulations. Collaborating with other players in the sector can be a useful strategy for sharing resources and knowledge.
The next realistic step for a construction company is to explore renovation and refurbishment projects, which can offer opportunities in a market constrained by buildable land. In addition, taking part in free pilots with construction management software, such as Bloqbase, can help optimize processes and improve operational efficiency.
Sources
Libertad Digital: https://www.libertaddigital.com/libremercado/2026-01-28/asi-frena-el-urbanismo-la-construccion-de-vivienda-el-96-por-ciento-del-suelo-no-es-edificable-en-espana-7350136/