The Spanish real estate market has shown impressive recovery growth since the first serious downturn of the COVID-19 pandemic in 2021. However, this stopped as suddenly as it began when the European Central Bank (ECB) abruptly changed its lending policy and began to raise the key rate regularly. This has significantly increased the prices of mortgage loans, which have become unaffordable for a wide range of real estate buyers and, as a result, slowed down the market growth over the past 12 months.
The slowdown in the real estate markets and the decline in lending in Spain are uneven, but the National Institute of Statistics of Spain (INE) has recently shared information about one of the most notable examples of this trend. Let's pay attention to November 2022. Overall, the number of mortgage loans issued nationwide in November is still at an all-time high of 39,304, which is the highest result since 2010. Nevertheless, this figure was the result of a slowdown in the growth rate of the mortgage market to 9.3% per annum.
The ratio of closed and open loans was positive in 13 communities, but the number of closed loans decreased significantly in 4 communities. These are the autonomous communities of Castilla-La Mancha (-10.1%), Cantabria (-9.4%), Castilla y Leon (-8.7%) and Baskonia (-5.3%). Galicia grew by 1.7% over the year, but this growth was the slowest — 5 times less than the national average.
However, the volume of credit capital in Galicia showed a higher growth and rate — 8.6% for the year or almost 147 million euros. This is half as much as in Spain. The national average was 15.6% or 5.8 billion euros. According to INE statistics, the number of mortgages in the country increased by 12.6% between January and November 2022, and the amount of issued credit funds rose by almost 20%. These are averages triggered by the panic in the mortgage market earlier this year, when interest rates began to rise.
The situation in the housing markets is as follows. According to representatives of several real estate portals, most of the transactions were concluded in the summer, which became one of the main factors slowing down the pace of home purchases in the country. This happened when the market began to activate before the ECB’s rate hike would affect the market, affordable loans and real estate prices.
Overall, Spain is still performing well in the real estate market, as post-pandemic recovery growth has not been exhausted, and there is an impact of some current conditions in the global economy. However, the growth rate is slowing down and is overstated primarily due to the mortgage situation in Galicia. In November, the average mortgage interest rate was 2.55%, which is the highest since February 2020. This figure will continue to grow in 2023.