Economic deceleration has begun to affect the Alicante real estate market, and the impact is substantial. The volume of activity recorded in the first half of the year shows a notable dip, with a reduction of over 200 million euros in the value of transactions across the province. This comes on the heels of a 4.7% decline, according to the latest data from the Ministry of Transport, Mobility and Urban Agenda.
Across the six months, 27,983 homes were sold in the province. While this remains a figure well above pre-pandemic levels, it still marks 1,611 fewer transactions than in the same period last year. The data suggests the market may have hit a ceiling and could be moving toward normalization or a contraction, depending on the lens through which it is viewed.
Indeed, the drop in sales also translates into less money circulating through real estate channels. In the first half of the year, notarial activity stood at 200,000,000 euros, reflecting a drop of 207 million euros versus the prior year. For comparison, some sectors, like toy exports, exceeded the province’s revenue last year, which reached 156 million euros.
Foreign demand has also played a role. The state has managed to cushion a sharper downturn due to its sustained influence on housing transactions across the country. International buyers in the Costa Blanca region, who account for nearly half of the market, remained cautious. Many purchasers who did not rely on bank financing helped shield this segment from higher interest rates.
An apartment on the beach costs 55% more than a typical Alicante apartment
However, the second quarter data show a shift. Foreign buyers are thinking twice before committing to a significant home purchase. From April to June, international purchases fell from 8,263 to 7,898, a decrease of 4.4%. The decline is sharper when looking only at non-resident Europeans seeking a second home, with purchases dropping 8.2% from 5,888 to 5,400 year over year.
Despite interest rate movements that may affect locals differently, foreign buyers are also feeling the pinch from inflation and broader economic slowdown. The rise in mortgage costs is part of the broader fiscal environment impacting decisions on big-ticket purchases.
Municipal-wise, the second quarter shows a generalized slowdown across almost all towns, with Alcoy standing out by posting an 8% rise in transactions to 304. In contrast, Torrevieja registered the district’s highest sales volume, but transactions declined by 7.8% to 2,113.
Second-hand housing prices in Alicante rise and surpass 2,000 euros per square meter
Within the city of Alicante, the province’s second-largest market, sales activity contracted by nearly 16%, totaling 1,752 transactions. Orihuela followed a similar path with a 15.8% decrease to 1,249 transactions. Elche saw a 7.6% drop to 974 homes sold, Benidorm remained relatively resilient with 599 sales, a 1.1% dip, and Denia experienced up to a 28% decrease to 480 transactions.
Following a brief pause in August, Euribor rose again in September, signaling additional pressure for those reviewing mortgages in the coming weeks. The rate closed at 4.149%, up from 4.073%, the highest level since November 2008.
Consequently, the average monthly payment for a 105,000-euro mortgage over 25 years would be about 622 euros, an increase of nearly 250 euros since December 2021 when Euribor began its climb. In practical terms, Alicante households face roughly 3,000 euros more in mortgage costs annually compared to two years ago.
Looking ahead, indicators point to continued pressure on borrowing and demand. Elevated fuel prices and a potential shift in ECB policy toward further rate hikes to rein in inflation suggest that the downturn in new mortgage lending and home sales may persist. In current terms, the official cost of money has risen tenfold from earlier benchmarks.