Foreign demand has been one of the factors supporting Spain's real estate sector throughout its recovery. House purchases by foreigners have tripled in just 10 years, reaching the substantial figure of 65,300 homes in 2018, 12.6% of the total. This article looks at the foreign demand for housing in Spain as well as factors that will affect the trend over the coming quarters.
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CaixaBank Research has developed new models for forecasting house prices at the level of province using large amounts of information (big data) and applying machine learning techniques. According to these models, house prices will fall in 7 out of 10 Spanish provinces in 2021 and grow only very moderately in the rest. Comparing current forecasts with those projected by the models before the pandemic, a notable correction can be seen in the expected growth of house prices in one year’s time, approximately 4 pp on average. This correction has been more pronounced in provinces with a higher urban concentration and greater dependence on foreign tourism, although they are still the most dynamic in spite of this.
After the recent boom in tourism, of 2018 growth of international tourism slowed down in all regions of the world, with the exception of the Middle East where it increased substantially.
The CaixaBank Research real estate clock shows the trends in house prices and sales throughout the cycle.
The European real estate market has seen several years of strong growth. In fact, since early 2016, house prices in the EU have risen by 4.6% year-on-year on average, outperforming wages and GDP growth. This upward trend has been widespread across countries and also large cities. This article examines the factors underpinning this trend and whether it poses any risks.
The coronavirus pandemic took the world by surprise and brought international tourism almost to a complete halt. The initial phases of a relative recovery are restoring connectivity between those outbound markets and tourist destinations that have controlled the spread of the coronavirus. However, the sector will have to undertake a far-reaching and rapid transformation to adapt to the new, post-COVID-19 international tourist who will demand more personalised, flexible and, above all, safer services.
El sector turístico sigue siendo uno de los motores clave de la economía española, con un crecimiento previsto del PIB turístico del 2,7%, por encima del conjunto de España. Sin embargo, ha entrado en una nueva etapa de crecimiento más moderado tras los años de fuerte expansión impulsados por la recuperación pospandemia.
One of the variables with the greatest impact on consumption decisions are prices, which fell on aggregate by 0.3% in 2020 in Spain according to official data.25 However, there were marked changes in consumption patterns last year, making it very difficult to accurately measure the figure actually faced by consumers. CaixaBank’s own estimates based on high-frequency internal data suggest that inflation was somewhat higher, namely 0.1%.26 Moreover, inflation did not affect everyone equally, with differences depending on age and income.
- 25We have analysed inflation using the Harmonised Index of Consumer Prices (HICP) produced by the National Statistics Institute.
- 26Other studies also using high-frequency data have found a difference with respect to the official inflation data between April and December 2020 of 0.06 pp, 0.30 pp and 0.58 pp for the United Kingdom, Canada and United States, respectively, and between April and September of 0.60 pp for France (in our study for Spain, the estimated difference for both periods is 0.58 pp and 0.67 pp, respectively). See «Consumption shifts and inflation measurement during COVID-19», OECD, Statistical Insights (2021).
Spain’s real estate market slowed in 2023, but more gently than anticipated. Despite the sharp rise in interest rates, several factors have supported the sector, including a resilient labour market, significant immigration flows, the imbalance between the short supply of new housing and the high demand, and the improvement in household finances. On the supply side, the stabilisation of construction costs has allowed 2023 to end with a similar number of new home construction permits to that of previous years. In the first half of 2024, we expect this gentle slowdown to continue, as interest rates remain high and the economic environment continues to show signs of relative weakness; however, in the second half, as the downward path of interest rates takes hold and economic activity gains traction, we expect the real estate market to regain more vigour.
More and more people are renting their home. In the past 5 years, the percentage of households renting their main home has increased significantly: from 16.1% in 2013 to 17.8% in 2018. This strong demand for rental property has pushed up prices, especially in large cities and tourist resorts, although in the past few quarters there has been a slight moderation. With a view to the future, the demand for rented accommodation is expected to remain strong and, to avoid more pressure on prices, supply will have to grow in line with this demand.
The agrifood sector has continued to perform well since the most critical months of the pandemic. Primary sector production remains at a high level, the food industry is recovering from the slump experienced in 2020 and demand indicators suggest food consumption patterns are gradually getting back to normal, both in and outside the home. Agrifood exports are also booming, a lever of growth that will continue to be vital for the sector’s future.
The new Mortgage Act that governs real estate credit agreements has three main objectives: to provide more consumer protection, make mortgage contracts more transparent and improve legal certainty in the financial system. All three are vital to ensure the mortgage market functions appropriately and to improve financial stability.
House prices have risen considerably in recent years and the first signs of overvaluation are starting to appear in cities such as Madrid and Barcelona, as well as some tourist spots. But the situation is very different in less urban areas, where the recovery in the real estate sector began later and is much slower. As a result, regional divergences in the price and affordability of housing are widening.
The outbreak of the pandemic in early 2020 has had unprecedented repercussions in many areas of the economy. One of these has been household consumption, the main component of GDP and traditionally considered an indicator of the health of the economy and the well-being of society. Because of the restrictions on business and mobility during the health crisis caused by COVID-19, the drop in consumption was much greater than during previous crises. The positive side is that once restrictions were lifted, Spain’s consumption has rebounded more sharply in 2021 than in the past. In fact, in October the consumption tracker produced by CaixaBank Research using internal data was already 13% higher than in the same month of 2019.
The new European Commission has completed its first 100 days amid turmoil in transatlantic relations. The implementation of Trump’s agenda (and the accompanying drama) is accelerating the change in political priorities that was already foreseen for von der Leyen’s second term. The urgent need to build a more competitive EU now seems indivisible from the goal of maintaining the security and integrity of its borders. The next 2028-2034 budget cycle should reflect the bloc’s ambition in relation to these medium-term challenges, but between now and when that budget will be defined, there are tough negotiations to be had on how to finance it and critical questions to be answered on matters such as the future of Ukraine and climate commitments.
In 2024, the global economy remained resilient in an environment marked by restrictive financial conditions and the major international economies managed to grow by more than expected. Nevertheless, 2025 is still set to be a challenging year: the threat of greater economic fragmentation has now been added to the risk map, with an increase in trade barriers and uncertainty.
Following all these events, 2024 closed with gains in equities and with the dollar as the most strengthened currency, but with a significant increase in sovereign rates in the anticipation of higher inflation in the US, the unknowns surrounding the future of global geopolitics and the uncertainty about exactly how much more monetary policy will be eased.
GDP beat expectations in Q4 2024 with a quarter-on-quarter increase of 1.5%, placing growth for the year as a whole at 1.9%. The good performance in the final stretch of 2024 introduces upside risks into CaixaBank Research’s current forecast for 2025 (2.3%), due to the knock-on effect.
The figures for US GDP in Q1 reveal a contrast between the strength of domestic demand and trade flows that were anticipating the introduction of tariffs, while the euro area has shown accelerated growth. However, this boost could soon run out of steam: the tariffs and their consequences will begin to have a negative impact. For now, there are no clear signs of a slowdown in trade flows, but with uncertainty at peak levels, the global economy is expected to enter into a slowdown, with more risks to the downside and more questions than answers.