Published on Friday, April 14, 2023 | Updated on Friday, April 21, 2023

Spain | Real Estate Watch. First half 2023

Housing sales will slow in 2023 due to slower economic growth, rising interest rates and a reduction in savings accumulated in the pandemic. The shortage of supply will make the contraction of permits less intense and the price will remain stagnant. In 2024, growth will return to the sector

Key points

  • Key points:
  • The effect of the increase in interest rates is being particularly important in the real estate market. In fact, housing sales, especially used homes, and mortgages have been falling since the second half of 2022 and prices, although still rising, are growing at slower rates.
  • Housing starts continue to perform worse than residential sales. The uncertainty surrounding the regulation of the real estate market and the scarcity of developed land in areas of interest could be the reasons for the delay in some projects and, therefore, for this slower recovery. Rising material prices, labour shortages and economic policy uncertainty also play a role.
  • Housing transactions are expected to stand at just over 500,000 in 2023, a level similar to the annual average between 2015-2019. This is explained by slower economic growth, rising interest rates and the reduction in savings accumulated during the pandemic. The largest adjustment will be concentrated in used housing.
  • House prices will remain almost constant in 2023 (-0.2%), although in real terms the correction will be 3.9%. The reduction in sales will have a negative impact on house prices. However, high inflation and the relative scarcity of new permits, which will be reduced to around 100,000 units, will offset part of the negative impact.
  • The sector could start to show a new revival in 2024 with moderate increases in demand, supply and prices, in a context of a recovering economy and relatively reduced residential supply.

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