The real estate market in Spain in 2022 can be described as a record. Outstanding sales rates and volumes, extremely intensive price growth, high volumes of investments attracted to the sector were noted. This year we expect a different picture due to inflation, rising interest rates, the recession hanging over the world economy, the international political crisis and a number of other problems.
Let's turn to the latest market report from CaixaBank Research, the research arm of the third largest Spanish bank. First of all, it points to the almost inevitable "cooling" — a slowdown in growth rates in all indicators. The bank's experts predict a "noticeable decline in sales", an increase in production costs, and, despite the growing pace of construction, the volume of deliveries of new facilities to the market will decrease.
In particular, they expect a decrease in the number of home sales by about 20%, to 480,000 residential units. This is still a volume exceeding the results of the peak year 2007, but the trend is emerging confident. Housing prices "will maintain a modest positive growth rate in nominal terms (about 1%)." Nevertheless, it is emphasized that the risk of a sharp correction in the market is small. The situation similar to the indicators of Canada, New Zealand and Sweden should not develop.
Slowing house price growth
CaixaBank experts note that the housing supply continues to be quite limited, insufficient in comparison with structural demand. Especially in large cities. The situation of supply and demand imbalance will worsen throughout the year, but this will also lead to a drop in prices.
The shortage of supply has already led to an increase in prices, pushing many potential buyers away from the market. Additionally, prices are pushed up by an increase in the cost of new construction. In the near future, the average demand indicators will begin to decline and sellers will have to lower prices in order to bring buyers back.
The situation with the increase in construction costs will not disappear. The construction sector continues to face high prices for building materials and a shortage of labor in the labor market. The fall in energy prices at the beginning of the year did not have a significant impact on the overall trends.
A slowdown in price growth will be observed in all regions and provinces of Spain, including those popular among tourists. In some cases, prices at the end of 2022 even showed a drop. The market is in limbo. In the first half of 2023, the slowdown in price growth will become more pronounced.