The current state of Spain’s real estate market is characterised, broadly speaking, by the strength of demand and the scarcity of supply. As a result of this mismatch between supply and demand, home prices have accelerated, especially in the case of new-builds. Here at CaixaBank Research we already predicted that the upward trend in the real estate market would take hold in 2024, but the published data have proved to be more bullish than expected, and this, together with the improvement in the economic outlook, has led us to revise upwards our real estate sector forecasts for 2024-2025.
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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.
We identify the macroeconomic factors that affect the evolution of international tourism in Spain, including income growth in the source countries, inflation, geopolitical risk and exchange rates, and we estimate how many international tourists will visit Spain in 2024.
The rapid rise in house prices in many European countries during the pandemic has raised concerns about the possibility of a price correction in the coming quarters. Should we be worried in the case of Spain? Given the current macroeconomic scenario, we argue that there is no need for concern. This conclusion is largely due to the good financial health of households as a whole and to reasonable housing affordability in aggregate terms. Neither do we expect an upward spiral in prices: prices may pick up while the economy moves back to its pre-pandemic levels but, in the medium term, we expect house prices to grow in line with household income. We have confirmed this using CaixaBank Research’s new risk model (HaR).
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.
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.
The strong growth in the supply of housing persists, especially in areas with the highest demand. The sector will continue to expand over the next few quarters.
In 2023, Spain’s tourism sector remained on the path of recovery and growth, surpassing initial expectations and breaking records, not only in nominal expenditure but also in real terms. In 2024, we expect the positive trend for Spain’s tourism sector to continue and its GDP to increase by 2.5%, with the sector outpacing the overall economy and remaining one of the drivers of the Spanish economy.
We summarise the current state and future outlook of Spain’s real estate sector, in this preview of the CaixaBank Research Real Estate Sector Report 2S 2023.
Owning a second home is a widespread practice in Spain. In fact, second homes make up 14.6% of all Spanish housing, this figure exceeding 30% in some provinces. Where are these second homes located? What kind of household owns them? Understanding their distribution throughout Spain in relation to the usual place of residence is of great help in analysing the behaviour of the real estate market at a local level. Once again, we can use big data techniques to process the information and identify more complex dynamics than with traditional methods.
The key to the sustained increase in international tourist arrivals is the high sensitivity of demand to income growth in the source countries and a relatively moderate increase in domestic prices relative to the bigger increases occurring in competing destinations.
The recent boom in Spain’s international tourism is having a very positive impact on the growth of the economy and of employment. However, it also has repercussions for the resident population that are not always positive, such as greater congestion due to the larger influx of tourists in certain parts of Spain. This has rekindled the debate on the need to move towards higher quality tourism.
The combination of rapid population growth and the gradual decline in interest rates, coupled with the lack of supply, is driving up home prices, particularly in the new housing market and in the most buoyant regions, as well as in those that are most popular with tourists.
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.
House prices and the number of sales have surged since mid-last year in Spain, although there are significant geographical differences. In 2024, house prices grew more vigorously in the most expensive areas, thus widening the price gap between municipalities and regions, and this is causing some of the demand to begin to shift towards more affordable areas. At the provincial level, temperature could be a relevant factor: sales are growing more rapidly in the cooler regions of the Northwest of the peninsula, while the traditional tourist areas are experiencing a more gradual increase in demand. In addition, the sharp rise in house prices in the major cities is causing a shift in housing demand towards more affordable peripheral areas, where house prices are expected to experience rapid growth in 2025.
In 2024, Spain’s real estate market enjoyed a remarkable recovery, with a significant increase in both house prices and sales. Factors such as the growth of gross disposable income, foreign demand and falling rates drove this trend. In this article, we unveil our forecasts for 2025 and explain why we expect this boom to continue.
Beyond housing prices, there are several indicators which show that, after years of rebalancing, the Spanish real estate sector has a reasonably clean bill of health.
We describe where the Spanish housing market currently lies using the "real estate clock”, a tool which shows how house prices and sales in Spain evolve over the course of the cycle.
The demand for housing among non-resident foreign buyers has grown sharply in recent years, especially after the pandemic, consolidating itself as one of the main drivers of Spain's real estate market. This boom is a response to several attractions which Spain has to offer, such as economic stability, the perception of security, good connectivity and a real estate offer that remains competitive. The profile of these buyers and the areas of interest have diversified, with an increase in the variety of nationalities and chosen locations: the influence of the United Kingdom has reduced, Poland is in the top 5 buyer nationalities, interest from the US and Latin America is on the rise, and new centres of interest are emerging in less traditional areas, such as Castellón, Asturias, Huelva and Córdoba.