Market Trends and Housing Costs Across Regions
Prices for housing remain elevated despite shifting financial conditions. The latest indicators point to continued pressure from higher financing costs and persistent inflation, with rental prices also showing notable increases. A report issued this week highlights that elevated borrowing costs and ongoing inflation are dampening real estate activity, recording a quarterly drop of around 1.5 percent. Many analysts view two straight quarterly declines as the early signal of a trend that could persist through the summer and into the broader commercial market.
High mortgage expenses, coupled with an Euribor rate exceeding 3.86 percent in May and limited household savings, are expected to shape the housing market outlook for the year. This view comes from Ernesto Ferrer-Bonsoms, head of the Real Estate Business Unit at Solvia. He noted that the current financial climate supports a forecast of moderate price growth, with projected gains in the range of 1.5 to 2.5 percent by year end. Local real estate activity could experience several months of slower sales as a consequence of the complex market dynamics.
Valuation Society released a fresh issue of its Real Estate Industry Trends Report, incorporating data through June 2023 on new home price trajectories and related metrics. The study concludes that even amid rising interest rates and softer sales, the average price of new homes climbed by 6.4 percent year over year to 2,809 euros per square meter in June 2023. While still below the late 2007 peak of 2,905 euros per square meter, the pace of increases has cooled since December 2022, when the annual rise reached 7.1 percent. Consuelo Villanueva of the Appraisal Society attributed these increases to a tighter supply of new homes relative to demand, reinforcing the momentum in pricing.
The evolution of real estate activity shows regional variation. The Solvia report indicates that La Rioja and Navarra posted the strongest gains, each rising by more than 5 percent, while declines were observed in Illes Balears, Galicia, and Andalusia, ranging from about 4.6 to 7 percent.
Looking at provincial data, Gipuzkoa, Madrid, and the Balearic Islands reported prices above 3,000 euros per square meter, with Bizkaia and Barcelona not far behind, staying below 2,900 euros per square meter. Regions such as Malaga, Santa Cruz de Tenerife, Girona, and Las Palmas exceeded 2,000 euros per square meter, whereas Ciudad Real and Badajoz failed to reach 700 euros per square meter. In general, most of Spain’s 30 provinces show starting prices around 800 euros per square meter, with only a few approaching 1,500 euros per square meter.
Rent Trends
The rental market in Spain continued its upward trajectory in the first quarter, averaging 11.6 euros per square meter per month. This marks an 8.4 percent year-over-year increase and a 0.9 percent rise from the previous quarter. By province, Barcelona leads with rents around 16 euros per month per square meter, followed by Madrid at about 14.9 euros, the Balearic Islands around 14.6 euros, and Gipuzkoa near 14 euros. The lowest rent levels were found in Ciudad Real at roughly 5.4 euros per month per square meter. Among the notable changes, Granada, Jaén, and A Coruña recorded the largest increases, while Lleida and Girona experienced significant declines, including a notable downturn in Ourense, continuing a pattern of regional divergence in the rental market.
As new development activity moderates through 2023, financing costs remain high while land prices push downward pressures on the cost of starting new projects. These factors complicate credit access for both developers and potential buyers. Solvia’s analysis suggests that construction permit volumes in 2023 may not surpass the levels seen in the previous year, signaling a cautious outlook for new housing supply and project starts.