Just a few weeks before the end of 2023, the real estate sector was preparing to close a year that showed gains in activity. While higher interest rates and increased financing costs squeezed sales and mortgage activity, prices held up due to a limited supply of housing stock.
Given the monetary policy and the broader macroeconomic landscape, the housing market was expected to face a wobbling 2024, with the consequences of ongoing developments still unfolding. The discussion touched on rental market dynamics in stressed areas and related housing policies.
What are the experts’ predictions for the end of 2023?
Bankinter projected a 14% drop in sales. It noted a 1% price increase that remained surprisingly resilient, supported by a strong labor market, limited urban supply, and rising rents, which helped costs stay in check. [Attribution: Bankinter]
The Spanish Association for Value Analysis (AEV) highlighted that prices in the housing market would finish the year higher, with gains exceeding 6%. Growth in both new and resale stock was expected to slow in the coming year, around 5%. [Attribution: AEV]
Fotocasa, despite a softer pace following a very active 2022, forecasted year-end sales around 550,000 units, marking one of the strongest years since 2008, with price increases around 5%. They also anticipated as many as 380,000 mortgages, one of the best years since 2010, despite the notable downturn in some segments. [Attribution: Fotocasa]
The Idealist noted that fewer than 600,000 homes might be sold, which would still place the year among the best in the past 15 years in terms of volume, yet it signaled a drop of 8% to 10%. Mortgage lending was expected to fall by more than 25% on an annual basis. [Attribution: Idealist]
Pisos.com predicted a 10% decline in sales, with mortgages down as much as 18%. Prices were seen rising around 6%, rents potentially climbing 7% or more, while the Appraisal Society anticipated a price increase of around 100,000 euros, translating to 3.5% to 1,850 euros per square meter. [Attribution: Pisos.com; Appraisal Society]
What about by 2024?
Bankinter expected prices to dip by 2% and transactions to fall about 7%. The bank also forecast a return to modest price growth, roughly 1%, as Euribor gradually softens from 2025. [Attribution: Bankinter]
AEV projected second-hand home prices to rise around 3%, with new builds seeing gains in the 4% to 5% range. [Attribution: AEV]
Fotocasa anticipated sales above 450,000 with a return to more normal market dynamics. They suggested price increases would continue but at a slower pace. Idealista hoped for a rebound in activity, while supply constraints were expected to keep upward pressure on prices. [Attribution: Fotocasa; Idealista]
Industry observers expected purchases to be about 10% lower and prices to rise by 1% to 3%. Pisos.com noted a modest 4% drop in purchases and an 11% reduction in mortgage loans, with softening price momentum: around 2% for sales and 1% for rent. [Attribution: Pisos.com]
A turning point on the horizon?
The Appraisal Association suggested the current real estate cycle was nearing a valuation-driven turn. With macroeconomic volatility and policy shifts, they believed that as long as rates stayed high, activity would contract and prices would eventually recover. [Attribution: Appraisal Association]
Economists offered varied perspectives. Encina Morales de Vega of CEU San Pablo University noted that the incentive for new construction faced a significant pause, the most pronounced since the 2008 bubble burst, with prices near peak and costs peaking around the two-hundred-thousand-dollar mark. He warned financial viability, too. [Attribution: CEU San Pablo University]
Javier Rivas of EAE Business School observed price dynamics that surprised many. He argued that rates, in some cases exceeding previous booms, would continue to influence the industry and could drive lower prices if rate hikes persisted. [Attribution: EAE Business School]
José Manuel Corrales of the European University of Madrid pointed to a more moderate increase in house prices and anticipated a cooling phase in the broader economy due to persistent inflation. [Attribution: European University of Madrid]
In today’s environment, mortgage-free purchases were gaining traction, accounting for more than 58% of total activity, and notaries reported a record share of transactions involving foreign buyers, up to about 21%. [Attribution: Notaries and Economic Analysts]