The cost of new homes in Valencia is not going to go down; in fact, it looks like the prices are going in only one direction – up.
New homes in the Valencia and Valencian Community have reached historic prices, with an average of €1,841 per square meter in the last quarter of 2022, representing a 4.56% increase compared to the same period in the previous year.
Despite recent reports indicating a decline in prices in the overall real estate market, this trend is not expected to apply to new homes in Valencia. According to Luis Fabra, the director of the Real Estate Market Chair at the University of Zaragoza, we can only expect to see fewer new construction projects due to an increase in construction costs, which will continue to drive up prices.
In 2022, only 12.64% of homes purchased in the Community were new construction, the lowest percentage among all autonomous communities, with 87.36% being previously owned homes. While a general decrease in housing prices is expected, Fabra believes that there will be no price reductions in the new homes in Valencia market throughout 2023.
Fabra explained that the used housing market and the new construction market are “two different realities” in terms of price trends, and the physical characteristics of the homes are not necessarily comparable. While new homes in Valencia typically have worse locations, they excel in terms of advanced materials and energy efficiency.
In the current inflationary context, material and labor costs have increased by 9.7% in the last year, with a 14.3% increase in materials and a 2.2% increase in labor. The largest growth in material costs has been recorded in steel, glass, wood, lime, plaster, and synthetic materials. For example, the price of steel has skyrocketed by 26.14%, lime by 43.17%, plaster by 43.17%, and concrete by 19.92%.
The Valencian Community has the lowest percentage of new home sales in all of Spain, and the high production costs are making it difficult for developers to start new construction. “Production costs have become very expensive and if you are not able to pass the costs of the new homes in Valencia to the buyers, there will be less volume on the market.” Fabra explained.
Fabra has also pointed out that “there may be a difficulty with the land, but at the moment there is not much will to launch a product because of the lenght of the process (at least two to three years) and the uncertainty on the market.
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