Editorial transparency and use of artificial intelligence
This article forms part of the CostaLuz Lawyers blog and is published for general informational and educational purposes only. It was prepared with the assistance of artificial intelligence tools and, before publication, was substantively reviewed and editorially approved by Maria de Castro, a Spanish-qualified lawyer registered with the Cádiz Bar Association under number 2745, founder of CostaLuz Lawyers and the person responsible for the editorial review of the published content.
This article does not constitute legal, tax, immigration, employment, estate-planning or investment advice and does not replace an individual assessment and the professional work of the appropriate CostaLuz Lawyers specialist. No action or omission should be based solely on this information.
Spain is facing a housing shortage that is becoming increasingly difficult to ignore.
According to the Bank of Spain, the country has accumulated a deficit of approximately 750,000 homes in recent years. New households are being created at a much faster pace than new homes are being built, particularly in high-demand areas such as Madrid, Barcelona, Málaga, Alicante, Valencia, and Murcia.
Whenever housing shortages are discussed, the same explanations tend to emerge: a lack of available land, planning delays, labour shortages, rising construction costs, and excessive bureaucracy.
But occasionally, another argument appears. Some suggest that stronger legal protections for off-plan buyers may have made developers and banks more cautious, ultimately reducing the number of new residential projects coming to market.
As lawyers who have spent many years helping off-plan property buyers recover deposits lost in failed developments, we believe this is an important discussion worth exploring.
Why Were Buyer Protections Introduced in the First Place?
To understand the debate, it is important to remember why Spain introduced special protections for off-plan buyers.
When purchasing an off-plan property, buyers are often required to pay substantial deposits long before the property is completed. In many cases, construction may not even have started when the first payments are made.
The purpose of Law 57/1968 was simple: if the property was not delivered, buyers should be able to recover the money they had paid. For decades, this principle provided an essential layer of security for consumers investing their savings in a future home.
The Lessons of the Property Crash
During the years leading up to the 2008 financial crisis, thousands of buyers found themselves in a devastating situation. Developments stalled, developers became insolvent, and projects were completely abandoned.
Many purchasers discovered that the guarantees required by law had never been properly arranged.
At CostaLuz Lawyers, we represented many of those buyers. We met retirees who had invested their pension savings, families who had planned to relocate to Spain, and individuals who suddenly found themselves facing the possibility of losing everything they had paid: in many cases saving of a whole life.
The subsequent litigation led to landmark Supreme Court decisions confirming that banks could be held responsible in certain circumstances where buyers’ funds had been accepted without the protections required by law. These decisions did not create new rights; they reinforced protections that had existed for decades and helped thousands of buyers recover their off-plan deposits.
Does Buyer Protection Prevent Development?
In our view, the answer is no. The existence of guarantees is not what prevents housing from being built.
In fact, robust consumer protection should make off-plan sales easier, not harder:
- Buyer Confidence: When buyers know their deposits are protected through bank guarantees and legal safeguards, they are more willing to commit to purchasing properties before completion.
- Market Stability: That confidence is essential for many developments to proceed. A market without trust is not a healthy market.
An Often Forgotten Point: The Law Already Allows Flexibility
One aspect of the debate that is frequently overlooked is that Spanish law has never required a rigid, unrealistic approach to construction deadlines. Construction projects are complex, and delays can occur for many legitimate reasons.
The legal framework already allows for:
- Reasonable extensions of time.
- Agreed variations to completion dates.
- Contractual solutions negotiated between buyers and developers.
- Consideration of exceptional or unforeseen circumstances.
The principle of freedom of contract has always allowed parties to reach sensible agreements where delays are properly justified and transparently communicated. A delay does not automatically mean a guarantee must be called upon, nor does it automatically result in a legal dispute.
The Real Causes of the Housing Shortage
If buyer protection is not the primary issue, what is? The Bank of Spain points to several structural factors that are difficult to dispute:
- Lack of Buildable Land: Many municipalities simply do not have enough land ready for residential development.
- Slow Planning and Licensing Processes: Developments often take years to move from planning to construction phase.
- Rising Construction Costs: Materials, labour, and financing costs have increased significantly.
- Labour Shortages: The construction sector continues to face difficulties attracting sufficient skilled workers.
- Regulatory Complexity: Developers frequently face multiple layers of administrative procedures involving different public authorities.
These challenges have a far greater impact on housing supply than the existence of consumer guarantees.
Protecting Buyers and Building More Homes Are Not Opposing Goals
The discussion should not be framed as a choice between consumer protection and housing supply. Both objectives are necessary for a healthy housing market.
| What a Healthy Housing Market Requires |
| Sufficient new housing supply |
| Efficient and agile planning systems |
| Legal certainty for developers |
| Robust protection for buyers |
| Strong international confidence in the market |
Reducing consumer protections will not solve Spain’s housing shortage. Improving the speed and efficiency of housing delivery will.
A Final Thought
Having spent more than two decades advising and representing buyers in off-plan property matters, we have seen first-hand the consequences of inadequate protection. We have also seen how the legal protections provided by Law 57/1968 and subsequent Supreme Court rulings restored confidence in a market that desperately needed it.
Strong consumer protection is one of the primary reasons international buyers continue to place their trust in the Spanish property market. The challenge facing Spain today is not choosing between protecting buyers and building more homes—the challenge is finding ways to achieve both.
If you are considering purchasing an off-plan property in Spain, obtaining independent legal advice before signing any reservation contract or private purchase agreement remains one of the most important steps you can take to protect your investment.
María de Castro