According to a Spanish proverb, it is a bad idea to start building a house from the roof. But that is just what a Spanish firm is doing – and business is booming. Faced with a lack of available land in big cities such as Madrid and Barcelona, construction firm La Casa por el Tejado is building new apartments on rooftops – a sign that Spanish property is bouncing back eight years after a brutal crash.

Home prices are nearing pre-crisis levels in downtown areas of major cities, rents and mortgages are surging, the prices of hotels and resorts are sky-rocketing and a round of mergers and acquisitions have broken out among major property investors.

Though the market overall is still a long way from its giddy peaks, before the global financial crisis, few would have predicted today’s recovery when a decade-long boom ended in 2008, destroying two million jobs and holing the economy.

“In Spain, we have identified more than 4,000 buildings which have available roof tops to build on,” said La Casa’s founder, Joan Artes, whose firm hoists prefabricated apartments by crane onto building roofs. “At a time when we lack space to build, we’re talking of more than two million square metres.”

The revival has helped Spain to become one of Europe’s few economic success stories, with estimated growth of three per cent next year. Construction accounts for 10 per cent of GDP. But there are concerns that the market could slow if interest rates rise. Enrique Losantos, who heads the Spanish operations of real estate firm Jones Lang LaSalle, says the main risk would come from a change in monetary policy.

European Central Bank interest rates are still at rock bottom but it is due to start cutting its asset purchase programme next year. The US Federal Reserve has already raised interest rates and signalled a faster pace of increases in 2017.

“Some deals are made at very low yields and could suffer if there is some sort of shock on interest rates,” said Losantos.

Yields in the residential market stand at 5.9 per cent or closer to three or four per cent in downtown Barcelona and Madrid or for premium homes, according to property website Idealista. It is 7.4 per cent and 8.4 per cent respectively for office and shopping space.

Those yields compare to just 1.4 per cent of Spain’s 10-year debt.