The Spanish agrifood sector has begun to recover after two years of decline, thanks to the moderation of production costs and the easing of the drought. However, the effects of both of these shocks still persist and the sector continues to face major challenges that are limiting its structural growth capacity.

The US’ tariff hikes of between 10 and 20 pps should have a limited impact on the Spanish economy, less than in other advanced economies, but some sectors could be more affected. 

Population growth has been one of the main factors that has driven the demand for housing in Spain in recent quarters and has played a fundamental role in sustaining home prices in a context of tightening financing conditions. In this article, we analyse the relationship between population growth and the evolution of home prices in the last two years. Population flows have been concentrated in large urban areas and tourist areas, and have caused a wide dispersion in the growth of home prices between the most buoyant areas of the country and those suffering depopulation.

In June 2016, the United Kingdom’s vote in favour of leaving the European Union (EU) opened up a new scenario for the British economy that could have important repercussions for the Spanish economy and particularly for the tourism industry, which receives around 16 million British tourists a year1. In this article we examine the impact of Brexit on the number of British tourists visiting Spain and its potential impact in the future under different EU exit scenarios.

Agrifood exports have continued to perform very well during the pandemic within a context where international trade has been particularly hard hit by the crisis. Swine meat, fruit and some fresh vegetables have been in greatest demand, while the Basque Country and especially Aragon have been the regions posting the largest growth in exports between January and July 2020. Despite this favourable performance to date, however, the sector is keeping a close eye on developments in global trade tensions, especially between the US and EU and the Brexit negotiations.

The pandemic has altered the commercial real estate investment landscape, creating different types of assets according to the degree of disruption caused by the travel restrictions imposed to tackle the health crisis. Assets that have benefited include residential property, logistics assets and data centres, as well as a large proportion of retail assets. Among the most disadvantaged are offices and hotel assets, weighed down by the rise in teleworking and slump in international tourism.

2020 will go down in history as the year of COVID but it will also be remembered that, faced by a very difficult situation, the response provided by the food chain was extraordinary, guaranteeing an uninterrupted supply to all Spanish households. A year and a half later, the primary sector still looks remarkably dynamic, although the exceptional growth rates posted during the most critical months of the pandemic have now been left behind.

Our Sectoral Indicator reflects a widespread improvement across the various sectors in 2024, particularly in some branches of manufacturing, such as the chemicals, pharmaceutical and paper industries, which have benefited from lower energy costs and an improvement in exports. By contrast, the automotive sector has slowed sharply over the course of this year, following the recovery experienced in 2023.

The rental housing market has attracted a lot of attention in recent years. Its sharp price rises, much bigger than the increase in wage income, has highlighted the economic vulnerability of households living in rented accommodation. These households tend to have a lower-than-average income level and a high percentage of them spend more than 40% of their income on housing-related payments. To redress this worrying situation, much-needed economic policy measures have been taken to increase the supply of affordable housing. However, other types of policies have also been proposed, such as rent caps in stressed market areas, although their effectiveness is limited judging by experiences in other countries.

After a year in which demand for housing exceeded all expectations, in 2023 we predict that the number of sales will adjust significantly, mainly due to the impact of higher interest rates. House prices, which tend to respond rather slowly to any fall in demand, will slow markedly although we expect them to maintain a slightly positive growth rate in 2023 (albeit adjusting in real terms due to high inflation). The supply of housing, which is insufficient to meet structural demand due to the creation of new households, will remain very limited as a result of the economic slowdown, high construction costs and waning demand.

Commercial real estate performed very well in the first half of 2022 but this situation is changing rapidly in the wake of the sharp hike in interest rates implemented by the ECB to curb the advance of inflation. All the evidence seems to suggest that office property may see the largest adjustment in valuation terms as this has the narrowest yields. Retail, whose valuations have already suffered several years of intense adjustment, could now become more stable than the rest of the segments. On the other hand, logistics assets, the star product lately due to the boom in e-commerce, may be more sensitive to any deterioration in the macroeconomic environment. Finally, we look at the co-living segment which has been attracting a lot of investor interest recently in Spain, especially in the case of senior living, a segment with very positive prospects considering the demographic outlook that will support demand in the medium and long term and the current limited supply.

Spain’s real estate market started to slow down by mid-2022 with the change in monetary policy. For the time being, and despite the fact that the ECB has already raised its benchmark interest rates by 4 bp, the pace of this slowdown is proving to be gentler than anticipated, leading us to improve our forecasts for the sector in 2023. However, looking ahead to the coming quarters, we still expect a marked dip in the number of sales from the high figures recorded in 2022 as well as a slowdown in house price growth, especially in 2024, within the context of higher interest rates for longer. Nevertheless, there are several factors that will continue to support the sector and make a sharp correction such as the one seen in 2008-2013 unlikely, including a resilient labour market and significant inflows of immigrants.

The arrival of the pandemic was a severe blow to a sector that was already going through a delicate situation due to trade tensions and disruptions in the automotive industry at a European level. The fall in manufacturing activity in Q2 2020 was sharper than the decline in the economy as a whole, although its subsequent recovery was more vigorous. Some sectors, such as textiles, footwear and beverages and even automobiles, were hit hard and are recovering more slowly, while other sectors, such as pharmaceuticals and food, were hardly affected at all. The lifting of restrictions, progress made with vaccinations and reduction in uncertainty will help to revive consumption and flows of international tourists, all of which are vital to our economy, and this in turn will support manufacturing.

The food price rally has begun to slow, but the cumulative increase since 2019 is significant and expenditure on food now represents a higher percentage of Spanish households’ consumption. The decline in agricultural and energy commodity prices in the international markets relative to their peaks reached in 2022 should help to contain agricultural production costs and thus to further ease the inflationary pressures on food over the coming quarters.

Analyzing of consumption growth since May 2021, when the last state of emergency ended, we can see that the recovery in spending on transport, and especially on leisure, hospitality and tourism, was particularly strong. The sectors hardest hit by the restrictions (most of them still in force in Q1 2021) are therefore the ones that are recovering the most. On the other hand, consumer durables (furniture, textiles, etc.) have benefitted much more modestly from the pick-up in consumption, as will be seen below, while spending on basic necessities has fallen (except among low-income households), partly because these goods can be replaced by the services offered by the hospitality industry.