Analysis of the Spanish Real Estate Market in 2023: Bright and Dark Sides

Analysis of the Spanish Real Estate Market in 2023: Bright and Dark Sides

The year 2023 posed challenges for the Spanish real estate market due to factors such as global economic instability and rising interest rates. Despite these difficulties, the sector showcased a degree of adaptability, with varied results across different segments.

Content:

Housing Sales

  • The number of property transactions totalled 480,000, marking a 10.2% decrease compared to 2022, according to data from the Association of Registrars. This decline was relatively moderate compared to sharper downturns observed in other European countries.
  • New housing was more adversely affected (-14.4%) than resale housing (-7.4%), reflecting buyer caution amidst rising prices and economic instability.
  • The second half of the year was the most affected, with transactions dropping by 15.5% in Q4 year-on-year. This may indicate the market’s adaptation to new conditions.
  • Regional Disparities: The Balearic Islands (+1.7%) and the Canary Islands (+0.7%) were the only regions to witness growth, while the central regions of Spain experienced the most significant decline.

Analysis of the Spanish Real Estate Market in 2023: Bright and Dark Sides

Housing Prices

  • Despite the economic situation, the average housing price across the country increased by 8.8%. This growth is slightly less than the 10.4% recorded in 2022.
  • Significant regional disparities persist: The Balearic Islands (+20.4%) and the Canary Islands (+14.1%) lead in price growth, while Castile-La Mancha (+2.2%) and Extremadura (+2.6%) demonstrate the lowest growth rates.
  • In Q4, there was a slight decrease in housing prices by 0.2% year-on-year, which may indicate market stabilisation.

Mortgages

  • A 8% decrease in the number of approved mortgages and an 18.6% decline in new applications reflect tightened mortgage lending conditions.
  • Increasing the average loan term to 25 years aims to alleviate buyers’ financial burden amidst rising interest rates.

Outlook for 2024

  • The outlook for 2024 is uncertain due to global economic volatility. A slowdown in housing price growth is anticipated, estimated at around 5%.
  • The number of property transactions may stabilise at around 500,000, with sustained demand from buyers seeking permanent residence.
  • Market development will largely depend on the dynamics of Euribor rates, inflation and the geopolitical situation.

Segment Analysis

  • Resale Housing: This segment exhibited the most dynamic performance, with a smaller decline in sales and more stable prices, attributed to its affordability and readiness for occupancy.
  • New Developments: This segment was most affected by the increase in prices and construction costs, experiencing a sharper decline in sales. Developers will need to adapt to the evolving demand landscape.
  • Luxury Housing: This segment demonstrated stability, with consistent demand from both local and foreign investors, contributing to price growth.
  • Rentals: The rental market demonstrated growth with increased demand and prices, particularly in major cities where supply is constrained.

Analysis of the Spanish Real Estate Market in 2023: Bright and Dark Sides

Conclusions

The Spanish real estate market in 2023 exhibited contrasting dynamics. While certain segments, such as resale housing and rentals, remained stable, the new-build market encountered new challenges, sparking uncertainty about the future.

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