The Spanish housing market performed very well in 2022. According to the latest data published by the National Institute of Statistics of Spain (INE), home sales increased by 10.8% in annual terms in November last year — over 55,300 transactions were concluded. This is the highest figure for November since 2007. These figures made November a success becoming the 21st month with positive dynamics.
An increase in secondary market transactions triggered an increase in real estate transactions in November. It was 14.3%, or almost 45,200 deals. However, new real estate transactions declined in volume. For example, new apartments fell by 3% year-on-year to 9,933 transactions. It is also noted that 92.2% of the housing sold in November were standard offers and only 7.8% were subsidized housing.
What about the main question? Is it worth investing in Spanish residential real estate in 2023? First, it is worth pointing out about some slowdown in the market.
Slight market slowdown
Lorena Andrea Zenklussen, CEO of Compracasa, said in an interview with the Idealista real estate portal: "According to the report of the consulting company JLL, the total investment in the Spanish residential sector in 2022 will amount to approximately 15.2 billion euros, which is close to the historical peak of 16.07 billion euros, which the market reached in 2019."
However, Lorena Andrea Zenklussen recalls that the volume of transactions in 2022 fell by 48% compared to 2021, and the fourth quarter of last year showed a 52% decrease in transactions by the third quarter of the same year. According to JLL, the market has attracted 1.9 billion euros of investment over the past 3 months. The figures reflect a slowdown in investment growth at the end of 2022.
Carlos Balado, professor at the OBS Business School and director of Eurocofin, points out: "The sharp drop in residential property sales in November last year keeps pace with general market trends. The United States showed a decrease of 4%. Other countries, such as Sweden, Great Britain and Germany, join it. These countries demonstrate the growing impact of rising interest rates on lending and liquidity flight." According to Balado, this situation proves that real estate markets are slowing down not only in the United States, but also in other developed countries.
However, Balado rules out a crisis in the real estate market along with financial problems. He also predicts that the real estate price index in the US and the Eurozone could fall by 5% in 2023. The situation is interesting in Spain, as 93% of development projects that were planned to be built in 2023 have already been sold out. 40% of projects for 2024 have also been sold out. There is no price drop in this situation. This is an attractive feature of the Spanish market for an international investor.
What to invest in?
According to Comprarcasa, one of the trends in the real estate market in 2023 will be the financing of development projects for rent. The point is to invest in off-plan housing or planned projects foreshadowing profits from long-term rental properties.
Another point may be single-family housing and luxury real estate. These products have strengthened the market since the pandemic, when consumer demand for open spaces and large residential areas has increased dramatically.