Focus on the impact of rate moves and market shifts
The recent pace of ECB rate increases has cooled inflation but has also sparked a banking sector scare, reshaping the real estate cycle across Spain. Data now point to a predictable slowdown in sales and a price adjustment as the year closes. Adjustments will vary by neighborhood, since no single average can capture the nuances of a Spanish property market that remains highly localised.
Ferran Font, research director at pisos.com, notes that prices are up on average by around 5 percent. For the coming year, he expects more modest gains, in the range of 2 to 3 percent. He adds that the trajectory will differ between rural areas or small towns and large capitals. Still, there is no clear consensus on how to forecast rate movements or the evolution of real estate transactions and prices.
Focus on second-hand markets
Last year, many buyers moved quickly to lock in favorable rates, and supply did not cool during 2022. With capital preservation in mind, a residence stayed a top priority in consolidated areas. The second-hand market is likely to attract more attention as buyers seek a more favorable price point and potentially higher profitability.
Servihabitat also observes that lease options could gain importance in 2023 as demand may slow the path to ownership due to tighter credit conditions and higher mortgage costs.
The real estate lobby remains influential. The belief that housing is a safe asset persists in difficult times, which could soften the impact of rising mortgage costs. In practice, events such as UBS’s acquisition of Credit Suisse, the decline in Deutsche Bank shares, or the potential fallout from U.S. entities could influence rate paths and Euribor, potentially nudging buyers toward housing as a store of value.
Hard to sell
In January, the National Institute of Statistics reports a 6.6 percent year-on-year rise in operations, the strongest January since 2008. Yet real estate firms may be pushing higher rates on property sales or already facing tougher conditions amid uncertainties. This statistical uptick does not guarantee a year-long trend.
The rapid rise in rates has outpaced expectations, leaving housing prices stagnant or slipping in some areas. Cristina Arias, director of Tinsa’s research service, explains that the squeeze on household purchasing power and higher financing costs are dampening overall demand, especially among low-income households. Font points out that, as purchasing power shifts, price declines have appeared in Barcelona districts like Nou Barris and Sant Andreu, while areas such as Sant Gervasi held firmer. Notaries have recorded a notable drop in housing loans, a trend expected to continue.
Forecasts from CaixaBank Research last year signaled a slowdown in activity but did not outline clear risk percentages. Judith Monturiol notes that rate increases were expected to temper turnover without predicting outright price drops. The sharp ECB rate hike has made mortgage payments substantially higher, chilling some households’ confidence and curbing demand.
Font argues that 2023 will see ongoing challenges with negative activity rates, and a record growth in sales is unlikely. He believes the market will not collapse entirely, suggesting a potential 15 percent decline in activity, equating to around 550,000 transactions by year end, but the sector should remain resilient at a base level.
Foreign investment
Foreign investment has emerged as a key factor in softening the sector’s downturn. Inflation trends have been less pronounced in Spain than elsewhere in Europe, making the Spanish real estate offer attractive for international buyers. Real estate players highlight strong demand from Latin American investors for Madrid and Barcelona, where prices stay comparatively reasonable against cities like Paris or London. Foreign buyers account for more than 15 percent of Spain’s sales, a figure that can be misleading in certain regions such as Alicante or the Balearic Islands where levels of activity can exceed 40 percent. The Balearic Government notes rising concerns about agents who primarily target buyers from abroad and has proposed measures to enhance oversight of these practices.
The rental market poses a substantial challenge in this environment where activity slows and prices rise. In Barcelona, supply constraints have tightened by about 20 percent while rents have climbed by roughly 20 percent. Industry voices argue that price caps would be inefficient and hard to enforce, even as tools to monitor rent trends for market-specific assessments gain traction beyond the simple link to property valuations and interest rates.
Spotahome’s March data show an 8 percent increase in long-term room rents across major European cities. Despite concerns of a price bubble, rents in Madrid and Barcelona remain significantly lower than those seen in other European capitals. Conversely, four Spanish cities — Vigo, A Coruña, Murcia and Oviedo — rank among the ten most affordable for room rentals on average, illustrating the regional diversity of the market.