After the bursting of the housing bubble that started in 2008, housing prices have not fallen at the same rate in every region of Spain. Specifically, they showed a smaller decrease in the Balearic Islands or parts of the Costa del Sol than in other coastal municipalities. In the current context, after the interest rate hike by the European Central Bank, its impact on the markets was different in each region of the coast. According to the valuation company Tinsa’s annual report on Spanish coasts, the market does not understand the crisis and continues to grow. “Prices of holiday homes on the coast continue to show an upward trend in the overall housing market, which contradicts the price stability observed since the end of 2022.” Without further progress, in the first quarter housing prices in coastal municipalities Spanish increased by an average of 4.1%compared to the same period last year.
Despite the good trend, the upward move in some markets is causing a drop. “overheating“, according to Tinsa, is understood as an intense acceleration in the number of sales and prices in a short time. Specifically, this phenomenon affects approximately 12% of all coastal municipalitiesmainly concentrated on the archipelago, Costa del Garraf (Barcelona), Tarragona (between Cunit and Altafulla), Valencia (between Canet d’en Berenguer and Alboraia) and Alicante (between Denia and Benissa).
This overheating will not have immediate consequences. “Price reduction not expected in 98% of coastal areas in 2023“, reassures the appraiser in question. In the remaining 2%, downside corrections could be triggered in municipalities where starting prices are high and with a bearish margin, for example Vizcaya or Valencia.
Balearic Islands, no exception
This Balearic Islands They have one of the most stressful housing markets nationwide and there is overheating, but increases are predicted to continue as there is more demand than supply, causing prices to skyrocket. They explain the reasons for this from Tinsa: “High foreign trade, average salaries above the local average, and tourism-oriented production model encourage investment in vacation housing as well as space constraints due to its geographical location as an island”.
Euroval, another valuation expert, calculates foreign demand in the Balearic Islands as follows: Two out of every five homes sold are bought by foreigners. As long as this demand does not contract due to mobility restrictions as during Covid, the market will continue its upward movement.
promotional event
meanwhile supportive activity, i.e. construction of new houses It is different in every coastal region. The market is polarized and development activity increased by 20% and 15% in the islands and Mediterranean Coast, although 2022 contracted by 28% and 5% on the Atlantic Coast and North Coast, respectively, compared to 2021.
The research highlights: “No new construction in one out of ten areas of the coast For a variety of reasons, including lack of land due to the cancellation of the General Plans or too slow urban procedures, financing difficulties for small and medium-sized developers, and unabsorbed stock from the 2008 crisis”.
In the current macroeconomic context, developers have to expose their projects to a higher cost of debt. Construction is mainly financed by bank loans tied to Euribor, which makes it difficult to come up with figures, with prices being more than 5% expensive. This It affects small and medium-sized companies more than large companies.usually have more financial power.