Spain’s housing prices rose by 0.6% in the first quarter of this year, according to the National Institute of Statistics. The uptick marks a return to the rising trend after a 0.8% dip across October, November, and December 2022. On a year-over-year basis, prices were up 3.5% between March 2022 and March 2023.
During January, February, and March, asking prices increased in most autonomous communities. The notable exceptions were Extremadura, Castilla La Mancha, and Murcia, which posted contractions of 1.2%, 0.8%, and 0.1% respectively. Navarra led the regional gains with a 2.5% increase, followed by Melilla (1.9%), the Canary Islands (1.9%), Aragon (1.4%), Galicia (1.3%), Cantabria (1.9%), and the Community of Madrid at 1% (CaixaBank data). These movements illustrate a varied landscape across Spain, with some regions showing stronger demand than others. (CaixaBank)
Zero price increases for existing stock outpace new construction
At the start of the year, the sharpest gains were concentrated in new construction, observed in roughly 10% to 20% of total transactions. Prices for new builds rose about 3% in the last quarter, while resale properties remained largely flat, rising only 0.2%. A similar pattern appeared in late 2022, when new construction advanced 1.9% but used properties fell 1.4%, marking the largest quarterly decline since the first quarter of 2013. (CaixaBank)
Why hasn’t the supply of brand-new homes collapsed? Since the housing bubble burst, production of flats and detached houses has consistently lagged behind the pace of new builds. For example, last year saw more than 200,000 homes completed, yet public authorities issued construction permits for around 110,000 units, according to CaixaBank data. This persistent supply gap helps keep prices steady or rising even with stable demand. (CaixaBank)
Unlike the pre-2008 era, developers have sold most homes under construction and are waiting to finish projects. Notably, the two largest Spanish developers, Aedas Homes and Neinor Homes, had 75% and 71% of their 2023 delivery targets booked, respectively, underscoring the tight supply dynamics in the market. (CaixaBank)
Sales activity also declines
In the first quarter, 162,236 homes were sold, compared with 165,799 in the same period last year, marking a 2.1% drop. March represented the third consecutive month of sales declines after a long run of growth. Industry portals have flagged the correction as ongoing in the coming months, driven by higher Euribor rates and tighter financing conditions. The market is adjusting to a new financial reality, with buyers and lenders recalibrating expectations. (CaixaBank)
Forecasts from real estate portals suggest that the pace of transactions will remain weaker in the near term. CaixaBank notes that 2023 could close with around half a million sales, well below the 2022 total of about 650,000 and far from the historical average, signaling a return to 2019-era levels. The correction reflects a normalization after the surge in activity in 2020 through 2022, aligning with more sustainable market fundamentals. (CaixaBank)