How Much is Too Much?

Would you be prepared to pay a premium for a property, and if so, how much? Premiums for special features are a factor in all real estate markets and many buyers are prepared to pay them. Some years ago, I calculated the going rate for the 'unobstructed sea view in Andalucía premium' was about 25%, see my blog here. Others put extra value on a gated community with 24/7 concierge presence while another very common demand is being able to walk to a wide range of services and amenities, reducing dependency on a car. And it’s often the case that new property also commands a premium when compared with the price of a similar secondhand property in the same location. But is it a standard amount and, if it isn’t, how much is too much? Having taken a long look at the latest data I believe new-build premiums in the Spanish property market are at record levels. 

Shiny & New

For reasons I have never quite understood, foreign buyers are like moths to a flame if new-build is available, even when the location is inferior and the property smaller. The fact is there is not much raw building land available in the very best locations, particularly in the Mediterranean hotspots that appeal to overseas buyers, it was built on years ago. So it follows that much of today’s new-build activity is not in prime locations. That’s why high-quality, recent renovations have become the best route to getting a property with contemporary style in a great spot. In addition, plots and constructed square metres are being squeezed to the extent that some new villas are so close together on very small plots I struggle to describe them as detached. In the case of apartment complexes, green spaces and communal areas have shrunk and a typical two bedroom, 2 bathroom apartment of 85m² would have been at least 120m²,  even as much as 150m² in the 1990s. 

Until recently, we didn’t have the data to know what the new-build premium was, if, indeed, there was one. It was all guesswork and my best guess would have been in the region 10% - 15%, which, I understand, is considered normal is a stable market.  That seems fair for a newer product with up-to-date fittings, 10 year guarantees, and, if purchased during construction, perhaps the option to customise. However, we now know it’s a lot more than that in Spain, thanks to the Notaries improving their reporting of property market statistics, with data for prices per square metre separated into national, regional, provincial and municipalities, with new and resale properties further divided into houses and apartments. My research suggests the new-build premium in the current market in Spain could be seen as somewhat excessive. Is buying a new-build property in Spain in the current market a bit like buying a new car, which loses about 20% of its value as soon as it leaves the showroom?

 The very latest statistics for 2025 show that, across the whole Spanish market, resales accounted for 91.39% of transactions and new-build 8.61%. That’s a very different scenario to the building-boom days when the new-build sector dominated with as much as 40% of the market. One reason for this could be that new-build properties, both apartments and houses, are currently very scarce but having scrutinised the figures I’m starting to consider another reason could be that it is now just too expensive. Are buyers thinking that new-builds are so overpriced compared to resales it just doesn’t make financial sense to dive in?

New build Premium & Higher Costs

What the new notarial data reveals is startling. My dive into the statistics showed that, nationally, the overall new-build premium is 50.1%, but when categorised by type is falls to 35.1% in the case of apartments and then rises to an astonishing 80.3% for houses. For an analysis at the regional level I chose Andalucía because it is Spain’s largest autonomous region and accounts for 20% of all property transactions in the country. Here, we find the overall new-build premium is 61.1%, 49.1% for apartments and 69.3% in the case of houses. Málaga province, which is the engine of the Andalucía property market with 25% market share, has a new-build premium of 33.5% overall, dipping to 30.6% in respect of apartments and 32.5% for houses. And finally, at the municipal level, I looked at Marbella, where the new-build share of the market is 7.2%, slightly below the national average. Here, buyers are paying 25.2% more for a new-build property overall, 23% if it’s an apartment and 30.6% more for a new house.

On top of that, buyers’ costs are higher for new-build property compared with resales in many cases. When buying from the developer there’s IVA (VAT) at 10%, (20% for plots), plus 0.5% - 1.5% AJD (Stamp Duty). which is set by the the autonomous regions and varies. When notary, registry, and lawyers’ fees are included, a reasonable estimate for buyers’ costs when buying a new-build is 15% on top of the purchase price. 

In contrast, there is no IVA or AJD to pay when purchasing a resale. The main tax is ITP, (Property Transfer Tax), which is as low as 6% in Madrid and 7% in Andalucía or as high as 13% in the Balearic Islands, which operates ITP on a sliding scale between 8% and 13%. In the lower ITP regions it should be possible to cover all costs for 10% of the purchase price. 

Considering the premiums I’ve shown, plus the additional buyers’ costs on purchase, I think it has to be considered likely that those buying a new-build property in the current market are paying such inflated prices they may never see a return on their investment no matter how long they hold it. Having said that, I still don’t see a bubble about to burst in a market that is not about excess but a long, drawn out recovery and a worsening supply side. Maybe more of a slow deflation, with affordability, not increased supply, bringing down the excessive new-build premium to a more reasonable level. Otherwise, I see owners facing depreciation in the value of their new-build, which, of course, becomes a resale in its next life. The fact that they paid a highly inflated price when it was new won’t be of the slightest interest to a buyer, it will have to find it’s level in the resale market. 

I am astonished at the discrepancy between the two sectors of the market and, although it’s not possible to make historical comparisons because the data doesn’t exist, I feel sure it’s at a record level. Perhaps that’s why, in over 20 years of working as a buyer’s agent, I have never recommended a new-build to any client. I’ve always been able to find better value, larger properties and better locations in the resale sector.

©Barbara Wood

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