Inflation pressures in the housing market are expected to ease, with a slower pace likely to emerge in the second half of the year and more pronounced effects anticipated in 2023. A predictive study from Fragua by Atlas Real Estate Analytics highlights a 2022 close with transactions about 2.3% above 2021, followed by a 15.4% decline in purchases by the end of 2023, underscoring a cooling trend in Spain’s residential activity.
The first half of 2022 began on a hopeful note. Between January and June, 311,900 purchases occurred, beating the same period in the prior year. If this momentum persists, macroeconomic factors could temper the growth, leading to a year that mirrors 2021 but with higher overall activity than that year.
Free house price cuts second quarter growth to 8%
The story on prices mirrors the sales pattern: price evolution shows more inertia than transaction volume. The projection for 2022 places the average price at 2.9% higher than 2021, with 2023 finishing about 0.9% lower. Even with a correction, prices appear stabilized within a normal range, unlike the run that occurred when prices exceeded 2000 euros per square meter during the 2006–2008 period.
Although the overall impact of 2022 is hard to measure in isolation, a comprehensive time series analysis suggests that the price movement from 2021 to 2022 is part of a natural uptrend that began in 2020 due to rising housing demand. This interpretation comes from Fragua, a study conducted by Atlas Real Estate Analytics.
The average housing price in Spain stands at about 1,734 euros per square meter. Consequently, a 75 square meter apartment would cost roughly 130,050 euros, reflecting a 5.7% rise from 2020 to 2022. This increase does not indicate an overheating market; current prices remain within a normal range relative to prior market dynamics. It is worth noting that in 2007 and 2008, the average price temporarily exceeded 2,000 euros per square meter.
Increase the average mortgage
Meanwhile, the average mortgage amount sought to purchase a home is nearing 143,000 euros. During the peak of the housing bubble, indebtedness surpassed 150,000 euros. Despite this, a mortgage crisis does not appear imminent in Spain, as the mortgages-to-sales ratio remains below 1 at 0.69. This means that 69 out of every 100 real estate purchases required financing, while the ratio in 2011 stood at 2.0 loans per 100 purchases.
Households are in a much steadier position, with debt levels significantly lower than in the early 2000s. This creates a healthier starting point should a recession arise, and the average mortgage value remains below the peak seen in 2007, according to the report.
Decrease in supply
One notable finding from the Atlas Real Estate research is a substantial drop in the stock of homes for sale, down by about 640,700 units. On the positive side, the analysis notes that reduced supply can offset weaker demand during a downturn, contrasting 2008 when both demand dropped and supply remained high. The current dynamic allows for controlled slowdowns rather than sharp shifts in home prices.
The time on market from listing to closing remains steady, averaging 130 to 150 days. The combination of shrinking supply, slightly longer lead times in major markets, and the impact of inflation and construction costs on new homes suggests a cooler market ahead, according to Fragua by Atlas.