The state of the Spanish real estate market at the beginning of 2023 clearly demonstrates that for many, buying their own homes remains an almost unattainable dream. Prices for both old and new housing continue to grow, and at the end of 2022 there was an annual price increase of 7.1%. This has not been observed since 2007, the last «price bubble» in the local market.
Mortgage terms have long since left the limits of what is reasonable for most Spanish buyers. Only for the purchase of real estate today, the buyer is required to provide about 20% of the total amount of real estate. We will also add mortgage payments, which itself has risen in price, following the indicators of the Euribor index, which has already exceeded 3%.
At the same time, rental is gradually becoming unattainable, which has been a refuge from the growing market for millions of buyers in the last couple of years. Rental rates have also reached historical peaks recorded more than a decade ago in 2007. According to the latest data, the average rental rate in almost all autonomous communities in Spain has increased by 14% compared to 2021.
The highest rate increase was recorded in the autonomous community of Valencia, followed by Catalonia and Madrid. Speaking of Madrid. If during COVID-19 it was possible to expect from particularly loyal homeowners a reduction in rental rates for their tenants who found themselves in a difficult economic situation, then today it is not worth hoping for such a thing. Tenants themselves, in order to make ends meet, it becomes necessary to raise the prices of rental housing.
The emerging crisis affects everyone, the growth of costs for utilities, electricity and water, food, fuel, and so on. All these factors affect the decline in the standard of living of both landlords and tenants. Over the past year, 23 of the largest cities in Spain have reported record, in the historical perspective, the growth rates of rental rates. In fact, only in Palencia, Cordoba and Samara the cost of rent has decreased by 2021.
Few doubt that 2023 will surpass current figures both in price terms and in terms of rental rates for residential real estate. It is expected that the year will remain in a trend of continuous growth, albeit at a more modest pace, compared with 2021-22. Oscar Martinez, a real estate expert at COUPE, emphasizes the upcoming price increase, coupled with a general slowdown in the pace of this growth and stabilization of the market. Nevertheless, the shortage of supply in the market dismisses any reasons for a real decline in prices and rates.
Anyway, the expert points out that growth is guaranteed to slow down gradually. Although supply has not kept pace with demand, new homes are still being built. At the moment, the market, in prices and rates, will continue to grow due to the deficit, which will gradually cut off an increasing number of buyers and tenants. Eventually, demand will shrink to acceptable values, and new real estate will enter the market, and prices will reverse, the stirrup will return to balance.
At the moment, the market can only count on a little help from the state. Like the existing restriction on the growth of the rental rate from contract to contract by 2%. Homeowners cannot increase the cost of renting a home by more than the specified percentage of the previous rental price. The state has several laws in development to support the sector, but they have been frozen or suspended for several months. Experts will continue to monitor the market both at the national and regional levels.