A chronic shortage of properties continues to push house prices upwards across Barcelona, according to a new report.

The report from CBRE reveals that a lack of land is holding back housebuilding, contributing to the supply-demand imbalance that is driving up prices in the Catalan capital.

Demand for property in Barcelona is currently being fuelled by a strengthening domestic economy, less stringent mortgage lending conditions and historically low mortgage borrowing rates.

CBRE forecast that residential property prices in Barcelona could increase by as much as 10% on average this year, on the back of the lack of new homes being delivered onto the market. Prices in Catalonia as a whole are forecast to rise by 7%.

“What new development activity there is in the city tends to focus on the refurbishment of existing buildings, in many cases financed by investment funds,” said mark Stucklin of Spanish Property Insight.

“Many of these projects involve a change of use from offices to residential, as fast rising house prices make residential real estate more lucrative than office space. Change of use developments are full on in the Old Town (Ciutat Vella) with 5 projects underway, the Eixample with 12, and Gracia with 8,” he added.