The past year has been successful for the Spanish real estate market. The sector has achieved indicators that have not been recorded since 2007. High inflation, at the same time, did not become an obstacle to the growth of real estate sales, at least in the first half of the year. According to INE, in October 2022, the number of real estate transactions was 11.4%, and in November by 10.8% compared to the previous year. Nevertheless, the November figures were 30% lower than at the beginning of the year.
According to forecasts, the market situation will change in 2023. It has already begun to change, which is due to a number of factors, especially in the monetary policy of the European Central Bank (ECB), which will continue to raise the key lending rate. The last increase was 50 basis points. The next increase is also planned by 50 points. Further prospects are unknown. The volume of growth can either be reduced to 25 basis points, or maintain the «new norm» of 50 points.
The German technology startup Evernest, taking into account the current situation, has compiled a list of trends for the next 12 months that will openly manifest themselves in the market and affect its development prospects.
First of all, the demand for real estate will remain, despite the increase in prices and interest rates. However, the nature of this demand will finally change. The main buyers will be wealthy individuals and wealthy foreigners, not an ordinary buyer. In view of this, sales will fall and their pace will decrease. The ECB factor described above will directly affect this. Individual transactions may show higher price indicators, but the overall level will steadily decline due to the fact that the overall consumer base will shrink.
We should expect an increase in the receipts of new real estate on the market. Especially in the second half of the year. In 2022, a large number of new arrivals to the market were recorded. According to Brainsre, 4,579 DOV were completed and put on the market in Madrid alone last year. High volumes of deliveries were also observed in other areas of Madrid, such as Hortaleza, Vicalvaro, Tetuan, Arganzuela and Barajas. However, the current volumes are still not enough to meet the existing demand.
In 2023, an increase in the number of new real estate on the market is projected, including due to projects postponed in previous years. These new projects are already very popular, as evidenced by the indicators of unscheduled purchases of these objects even before they enter the market. The purchase of new buildings allows you to make the first payments in installments and even before the completion of the construction of the property itself. This amortizes prices and allows you to save money, while at the same time providing developers with a stable inflow of funds even before entering the market.
Another trend will be the growth of investments in Spanish real estate and the expansion of the presence of foreign capital in the market. As mentioned earlier, rising prices, the crisis and rising interest rates on loans cut off the average buyer from the market. However, it is being replaced by foreign buyers, investors and companies. A large proportion of this demand has its own funds for purchases and does not need mortgage loans. But even those who prefer to use borrowed funds to buy real estate have sufficient income to open such loans.
The country's largest cities and provincial capitals will remain the main centers of growth. Despite the fact that housing prices will steadily decline throughout the country, large regional markets have a sufficient margin of safety and high attractiveness indicators to resist the current trend. Cities such as Madrid, Barcelona and Malaga have a special demand and opportunities to counteract the fall.
According to Evernest, prices in Madrid have shown a significant increase over the past year, as could be guessed from the sales information listed above. And at the same time, the city pulled out other districts and cities of the province of the same name. All of them recovered to pre-pandemic levels, and some even surpassed them. For example, Retiro, where the price increase was 10% by the end of 2019. Today, a square meter of housing in this area costs about 6,000 euros.
It is also noted that 2023 will be the year of stabilization. Experts do not expect sharp falls, as it was during the beginning of the pandemic, but they do not expect record growth rates, which have been observed since 2021, after the end of its acute phase. The drop in demand and prices will be smooth, soft, confident, but not catastrophic. The initial months of the year will be more positive than expected at the end of 2022, but this is only a local change in the forecast, which will not reverse the global trend.
Oscar Larrea, Senior Vice president of Evernest Spain, points out that this year the Spanish market expects a lot of big and small problems, but they are surmountable.