Housing prices rose more in communities that welcomed more tourists than in areas with fewer visitors. Regions with a tourism component — including Andalusia, the Balearic Islands, the Canary Islands, Catalonia, the Valencian Community, and the Community of Madrid — saw an average increase of 9.9% over the past year, according to data from the real estate portal Idealista. With data through November, Catalonia was the most affected area in 2023, followed by the Balearic Islands with 16.9 million tourist arrivals, the Canary Islands with 14.2 million, Andalusia with 12.5 million, the Valencian Community with 11.5 million, and the Community of Madrid with 9.7 million. This information comes from the National Institute of Statistics (INE).
Except for Catalonia and Madrid, where house prices rose by 1.9% and 4.8% respectively, the other regions reported double-digit increases: 15.9% in the Canary Islands, 12.7% in the Balearic Islands, 11.3% in the Valencian Community, and 9.9% in Andalusia. The two communities that host Spain’s two largest cities, in addition to their tourism, also influence other economic factors that help explain the different market behavior.
Importance of foreigners
The housing market in tourist zones shows a strong link to foreign demand. In recent years, foreign buyers have shown very high appetite, with purchases reaching new records. A spokesperson for Idealista notes that foreign demand is a key driver behind price increases, especially in the island regions and along the Mediterranean arc where activity is strongest. He explains that in most other parts of the country, except major markets like Madrid, the rises have been more modest due to the lack of international buyers.
David Martínez, CEO of Aedas Homes, underlines the importance of foreign buyers. He says the large presence of international clients in the tourist residential market supports the sector by complementing local demand for holiday homes and by contributing to the broader economy, effectively exporting homes and stabilizing demand patterns in a cycle that can be volatile for a purely local market.
The living space division of the consulting firm CBRE in Spain notes that foreign demand continued to rise. Data from the third quarter of 2023 shows that foreigners accounted for 15.44% of total housing purchases, the second highest figure in the historical series. Leading nationalities include the British, Germans, French, Belgians, Moroccans, and Italians. The provinces with the highest foreign purchases in the third quarter were Alicante, Santa Cruz de Tenerife, Málaga, and the Balearic Islands.
What will happen in 2024?
The housing market is in a slowdown phase, and it remains uncertain what 2024 will bring after the boom years of 2021 and 2022. Various estimates suggest that sales may continue at a moderate pace with no broad declines in prices, though increases may occur. An Idealista spokesperson notes that a current lack of supply limits many transactions and helps push prices higher, while higher financing costs have had little impact. The sentiment is that the market could stabilize in 2024, with price growth possibly accelerating in less touristy areas if a potential ECB rate cut is confirmed in the second half of the year.
Javier Kindelan points out that the medium to long term market dynamics will not be uniform across Spain. Demographic and macroeconomic factors suggest a brighter outlook for provinces with higher population growth, particularly in demand and price in the Canary and Balearic Islands, Alicante, Málaga, Madrid, and Barcelona.
The CEO of Aedas Homes believes that new construction remains strong, driven by persistent supply shortages and solid, solvent demand. He notes that the favorable moment in the housing market is likely to persist in 2024, especially in tourist sectors. In regions like the Costa del Sol, Levante, the Balearic Islands, and the Canary Islands, as well as northern tourist hubs such as Laredo or Sanxenxo, demand remains high from local, national, and international buyers. Many buyers are purchasing second homes or hybrid homes that blend residence with remote work. The trend is shifting toward longer-term use of properties previously considered tourist residences.