Published on Monday, April 24, 2023

Spain | Where is the real estate market headed?

Going forward, the real estate market will be exposed to factors that will put negative pressure on demand. For example, interest rates are expected to continue rising and the 12-month Euribor is expected to stabilize above 4% and remain there for much of 2023 and 2024.

Key points

  • Key points:
  • As a result, housing affordability (the proportion of household income that goes to housing payments) will climb to levels above one-third of household income.
  • Meanwhile, households have already exhausted a large part of the savings accumulated during confinement, which has been instrumental in financing new home purchases. Also, inflation remains high, which will reduce the purchasing power of income and wealth.
  • This is coupled with a slowdown in economic growth, which in 2023 will be around 1.6%, almost 4pp lower than in 2022. Consequently, home sales are expected to fall by around 30% compared to the previous year, to 515,000 units.
  • We are coming out of a 2022 that saw the housing market go from better to worse. Sales dropped from a monthly increase of 0.3% in the first half of the year and a 29.3% increase over the transactions observed in the same period of 2019, to a month-on-month decline of 0.7% in the second half of the year.
  • The same was true of prices: the year-on-year gain of 6.7% in the first quarter slowed to 3.3% in the fourth quarter, according to MITMA data.

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