A slowdown in the growth of the Spanish real estate market on the horizon: we should expect a drop in prices and a decrease in demand

A slowdown in the growth of the Spanish real estate market on the horizon: we should expect a drop in prices and a decrease in demand

Despite the fact that the Spanish real estate market still has every chance to survive the global crisis unfolding at the moment quite easily and show growth above the average for the eurozone, it is impossible to deny that future events will affect it. Analysts from ING Group indicate that at least by the end of 2023, we should expect a pronounced slowdown in price growth and declining demand.

ING experts expect that the Spanish real estate market, as well as the world in general, is extremely likely to face a recession in some form in 2023. Perhaps this will happen at the beginning of the second half of the year. However, studies show that it is not worth expecting a collapse of the Spanish market, comparing the events of the late 00s. And in comparison with other European countries, it will be possible to talk even about exceeding the average.

As for the dynamics of prices, according to available estimates, first of all it is necessary to prepare for the stagnation of their growth. Although real estate prices in the country increased by 7.4% in 2022, more than a year earlier, it is now clear that we have observed a peak indicator. Now we see in many countries a crisis of the financial system, the economy and problems in the real estate markets, but central banks continue to raise interest rates, which makes credit financing more expensive. At the same time, regional financial organizations are tightening the conditions for issuing new loans, since the example of SVB and a number of other banks has forced many such organizations to distribute their available funds more carefully.

All this makes obtaining the necessary finances for the purchase of real estate, both residential and commercial, an extremely difficult task and reduces the purchasing power in the market. Thus, prices are likely to remain stagnant throughout 2023. Effective demand is still enough to support current prices, but the lack of a large amount of available and cheap money will not allow any upward leap. One of the scenarios indicates that in the next 3 years, real estate prices in Spain will collectively decrease by 7%.

Looking beyond 2024, IGN believes that an active price increase comparable to the indicators of the last few years is unlikely. One of the reasons will be that it is possible to guarantee with almost complete certainty that low interest rates on loans will no longer become. At least for the next decade. The availability of the market will now be determined only by the price level and the volume of supply in relation to demand. If a person has no money, he has no money and no cheap loans will close this gap.

In 2023, a gradual weakening of demand is also predicted. The Spanish market will increasingly rely on foreign money, as the local population is experiencing a number of problems that prevent them from actively participating in the market. Household savings and wages are falling, inflation persists, housing prices have risen to unacceptably high levels, loans are expensive and are issued less willingly. The domestic market simply does not have the strength to feed the sprawling Spanish real estate market. The market will try to stay at the achieved levels, and for this, foreigners and their money remain the only way out.

In addition, experts point to several factors that stimulated the housing market last year and will disappear this year: "The demand for housing last year was largely due to households who used their savings accumulated during the pandemic to buy new housing at home. These savings have come to an end. In addition, many buyers more often decided to buy a home here and now in order to have time for a serious increase in interest rates while loans were still quite cheap. This factor has also disappeared".

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