Urban land sales and prices are on the rise in a positive sign for the residential construction sector, reveal the latest figures from the Government.

The price of land zoned for residential property construction rose by an annualised 9.7% in the third quarter to 156 €/sqm, according to the Ministry of Public Works (Fomento). On a quarterly basis prices fell 2%.

Urban land prices have now recovered by 10.8% since bottoming out at 141 €/sqm in Q1 2014, but are still far below (around 50%) their highs of close to 300 €/sqm in the peak years of 2006 – 2007.

The number of urban land transactions also rose in Q3, by 9.8% compared to the same time last year (to 4,192). As you can see from the next chart, the land market is down around 80% from the peak.

The land market was the most speculative of all during the last property boom, and many developers ruined themselves buying wildly overpriced land financed with debt.

Since then, the Spanish land market has collapsed, so signs of life are welcome in a business that is still on its knees.

At current land prices it is possible for developers to build attractive new homes at a competitive price, and make a reasonable profit in the process. However, this situation might not last long in markets with an acute shortage of land, like Barcelona and Ibiza, unless house prices rise too.

Urban land prices are highest in the provinces of Madrid (660 €/sqm), the Basque Country’s Guipúzcoa (557 €/sqm), and Barcelona (539 €/sqm).