The crisis tiptoes through the real estate sector

Activity in the real estate market is recovering from the extraordinary slump experienced during the strictest months of lockdown. House sales picked up notably in the first few months of 2021 while new building permits continue to recover gradually. On the other hand, house prices have accentuated their downward trend observed since mid-2018. Nevertheless, their performance was surprisingly resilient during the pandemic, particularly the prices for new builds, and we expect house prices to continue posting moderate but steady gains in the coming quarters.

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August 23rd, 2021
The Spanish economy is on its way to recovery

Despite a very weak start to the year, marked by a complicated epidemiological situation and considerable restrictions on business, from April onwards and especially in May and June, a widespread recovery could be observed in the economic indicators, which we expect to continue and even intensify in the second half of the year. The good rate of vaccination is helping to revive household consumption and tourism (especially domestic and European), to which will be added the first transfers of NGEU funds during the second half of the year.1CaixaBank Research therefore expects the Spanish economy, after falling by 10.8% in 2020, to grow by a significant 5.7% in 2021, speeding up to 6.2% in 2022.

  • 1. According to our forecasts, tourism will get back to around 50% of its 2019 level. In addition, the NGEU funds will contribute 1 pp to growth in 2021. However, developments in the epidemiological situation remain uncertain (such as the appearance of new, more contagious variants) and this continues to be the main determining factor for the macroeconomic scenario.
The Spanish economy has now reached the turning point we have been waiting for,

thanks to the extensive easing of restrictions on economic activity and the progress made in vaccinating the population.

The labour market is reviving with the lifting of restrictions on business, with job creation and the reincorporation of furloughed workers intensifying since the end of the state of emergency in May. Specifically, the number of workers registered with Social Security rose by 579,000 between April and June, while the number of furloughed employees fell by 277,000. As a result, effective employment (non-furloughed workers registered with Social Security) increased by 856,000 in Q2 to over 19 million, a very positive trend that we expect to continue in the coming months as the economic recovery takes hold.

The economic recovery is consolidating

Real GDP (100 = Q4 2019)
The economic recovery is consolidating
Source: CaixaBank, based on data from the National Statistics Institute.
Dynamic demand for housing

The demand for housing looked remarkably lively in the first few months of 2021, so much so that the cumulative number of house sales from January to May was only 2.3% below the figure for the same period in 2019.2 This recovery in sales is concentrated in new builds, which are growing quickly (+10.6% for the cumulative January to May figure compared to 2019), while second-hand sales remain weaker (–5.2%). As a result, the share of new house sales out of the total so far in 2021 has risen by 1.2 points compared to 2020, up to 21.1%. This more dynamic demand for new housing compared to second-hand is probably related to the new preferences of buyers for larger homes with bigger outdoor areas, as they have been spending more time at home because of lockdowns and the rise in teleworking, requirements that new developments find it easier to meet.

  • 2. The months of March, April and May 2020 were heavily affected by the slump in activity during the big lockdown, so we have taken 2019 as our baseline. Compared to 2020, sales rose by 24.8% year-on-year in the cumulative January to May figure.
House sales are very close to the figures posted in 2019

With a notable upturn in new housing linked to new needs on the part of households emerging
with the lockdown and rise in teleworking.

Sales are recovering: Total sales (thousands)

Last actualization: 06 August 2021 - 12:57

Sales are recovering: New builds (thousands)

Last actualization: 06 August 2021 - 13:03

Sales are recovering: Second-hand (thousands)

Last actualization: 06 August 2021 - 13:04

If we look at the type of buyer,3 we can see that the increase in house sales in Q1 2021 compared to Q1 2019 (2.2%) is due to a considerable rise in purchases of main residences by Spaniards (9.6%). In other words, the evidence seems to indicate that this is replacement demand by segments of the adult population with a medium-high socio-economic position, given that the crisis has had a greater impact on young people and workers with temporary contracts and low incomes, who would find it more difficult to buy their own home. The other buyer categories were less active: second home sales fell by 8.9% in Q1 2021 compared to the same period in 2019, while purchases by foreigners decreased by a significant 21.4%. The next article in this Report, entitled «How has the slump in foreign tourism affected the Spanish residential property market?», provides an in-depth analysis of the trend in foreign demand.

In line with the trend in sales, the number of new loans granted to households to purchase housing has rebounded (28.1% in the cumulative figure for January to May 2021 compared to the same period in 2019). Financing conditions for home purchase loans have also remained accommodative,4 reflecting the ECB’s monetary policy which aims to maintain an expansionary financial environment to support economic recovery. In this respect, CaixaBank Research does not expect any change in the ECB’s official interest rates during the forecast period (2021-2022).

  • 3. The transaction statistics published by the Ministry of Transport, Mobility and Urban Agenda (based on data from the General Council of Notaries) differentiate between purchases by foreigners, purchases of second homes (those in which the buyer and the home are in different provinces) and the rest, which are considered to be purchases of main residences by Spaniards.
  • 4. Specifically, interest rates on loans for house purchases have fallen by nearly 20 bp year-on-year to 1.5% in May 2021 (latest available figure), which is an all-time low, without the rest of the conditions becoming tighter, be it the terms, collateral required or amounts, except for conditions related to the borrower’s solvency.
The pandemic has led to a certain change in the type of housing demanded,

although it remains to be seen whether this is merely a temporary phenomenon.

Since the outbreak of the health crisis, there has been an increase in the average size of residential properties, both interior and exterior,5 the proportion of purchases of single-family homes has grown6 and there has been a certain shift in demand from provincial capitals to other less populated municipalities.7 Specifically, in 2020, 69% of the provincial capitals reduced their share of the total sales in their respective provinces compared to their average share in the previous four years. The city of Seville is a case in point, as its share of the province’s sales fell from 46.1% in 2016-2019 to 36.9% in 2020. However, in Q1 2021 most capital cities have stopped losing their share of sales with respect to their provinces, suggesting that this trend has been temporary, associated with the new needs of families arising from the lockdown and the increase in teleworking. Nevertheless, teleworking is likely to become more prevalent than before the pandemic, so a higher proportion of buyers may choose to live in locations further away from their place of work.8

  • 5. According to the College of Registrars, the average area per residence in 2020 was 101 m2, an increase of 2.2% over 2019. In Q1 2021, the average area continued to grow (+0.8%) to 103 m2, the highest level for the historical series.
  • 6. In 2020, single-family properties accounted for 20% of house sales (+1.9 pp compared to 2019), reaching the highest percentage in the historical series in Q4 2020 (22.5%). This percentage was still high in Q1 2021 (21%).
  • 7. These changes in demand may have also contributed to new builds being more dynamic during the pandemic, as they tend to be more adaptable to new buyer preferences.
  • 8. See «How will teleworking change urban mobility and residential decisions?» at

Sales decline in the provincial capitals in 2020

Change in share of sales in the province’s capital out of the province’s total sales in 2020
and in Q1 2021, compared to the average share for 2016-2019 (pp)
Sales decline in the provincial capitals in 2020
How will house sales perform in the next few months?

The main factors boosting housing demand will continue to support its positive trend in the coming months. Firstly, we expect the improvement seen in the labour market in Q2 to continue in the next few months as the tourism sector and leisure and culture-related activities recover. Secondly, the improvement in consumer confidence, already approaching pre-pandemic levels, and greater certainty regarding the developments in the health situation thanks to the progress made by the vaccination campaign, will encourage more long-term decisions to be made, such as buying a home. Thirdly, financial conditions will remain extremely accommodative and support the flow of credit to households. And, finally, the «forced»9 savings accumulated by households during 2020 could end up being allocated, in part, towards real estate investment. Indeed, a large proportion of these savings, around 3.5% of GDP,10 has been accumulated by middle and high-income households which tend to have a lower propensity to consume. If, in addition, we take into account the low returns offered by alternative assets, such an environment is likely to boost investment in real estate.

  • 9. In addition to precautionary savings resulting from the high uncertainty that normally comes with a recessionary period, the particular features of this health crisis have also forced households to save as it has been impossible for them to continue their usual level of consumption due to the restrictions on travel and business imposed to control the spread of the pandemic.
  • 10. See «Pent-up demand during the health crisis and the outlook for consumption» at
In 2021 as a whole, we predict 7.7%

growth in residential property sales, totalling 450,000 homes.

On the other hand, however, it is also true that the dynamic housing demand observed in the first few months of the year is partly due to a build-up of pent-up demand during the months of lockdown,11 an effect that will tend to dissipate in the near future. Likewise, foreign demand will continue to weaken until international travel gets back to normal (new outbreaks or more contagious variants could therefore affect the trend).

Consequently, in the coming quarters we expect housing demand to continue to grow but at a somewhat more moderate pace compared with the upturns seen in March and April. In 2021 as a whole, we predict 7.7% growth in residential property sales, totalling 450,000 homes. This forecast is significantly lower than the 505,000 sales posted in 2019, a sign that we expect housing demand to remain below potential until the economic recovery takes hold and, above all, foreign demand recovers fully, something we do not think will happen until 2023.

  • 11. Pent-up demand refers to households that wanted to buy a home but were unable to do so due to travel restrictions, or that postponed their purchase due to the uncertainty caused by the pandemic.
Supply indicators point to a weak start to the year but with a trend of gradual recovery

On the supply side, new building permits posted a weak start to the year. Between January and April 2021, around 33,000 residential properties were approved, a figure 12.3% lower than for the same period in 2019 (+16.7% compared to January-April 2020). On the other hand, the trend in certificates of completion is much more positive (28,754 homes for the cumulative figure from January to April, 22.1% more than in the same period of 2019). This shows that the pandemic had a huge impact on the start of new developments (permits fell by 20% in 2020), while construction work that was already underway restarted quickly after last spring’s interruption (around 86,000 homes were completed in 2020, 9.1% more than in 2019). Nevertheless, we should remember that this sharp fall in new building permits in 2020 suggests there will be a smaller number of homes completed over the next two years.

The production of new housing lags behind net household creation

Last actualization: 06 August 2021 - 13:05

Having overcome the weak first quarter in which, in addition to the pandemic, construction was also affected by the Filomena snowstorm, supply indicators have looked more positive in recent months. Cement consumption grew by 3.5% in May compared to May 2019 and confidence in the construction sector has improved considerably (now above its pre-pandemic levels). There is also a favourable trend in the sector’s labour market data; in June, the number of registered workers in construction, excluding furloughed employees, was 2.3% higher than in June 2019. By branch of activity, registered employment in the building sector seems to be less affected by the COVID-19 pandemic compared to the other branches of construction, as shown by the greater growth in effective registered workers (+2.5% in June 2021 compared with June 2019).

Despite the recovery in construction,

the production of new housing is not keeping up with the structural demand due to the net creation of households, potentially pushing up prices.

Construction will continue its gradual recovery in the coming quarters. We expect a moderate increase in new building permits (5%), totalling 90,000 homes in 2021 and 95,000 in 2022. On the other hand, housing completions could total 100,000 in 2021 (when the builds started in the final part of 2019 would enter the market), but would fall to around 90,000 in 2022 (due to the fall in permits in 2020). In both years, new housing production would again be lower than net household creation, something that has been occurring since 2010.

Construction costs rise temporarily

due to bottlenecks in the global economy.

The recent rise in commodity prices is having an effect on construction materials, whose prices rose particularly sharply in the first few months of 2021 (+4.6% year-on-year in April compared to April 2019). This increase is largely due to temporary factors related to bottlenecks in the global economy as a result of the strong economic recovery and short-term difficulties of adjusting supply to changes in demand, so it should not have a significant impact on the real estate market in the medium term.

House prices prove to be remarkably resistant to the downturn

Despite the historic economic slump and sharp drop in real estate activity in Q2 2020, house prices have been resilient. Although the downward trend observed since mid-2018 was aggravated last year, during the pandemic house prices were surprisingly resistant to falling, particularly in the case of new housing. This resilience has not been exclusive to Spain’s real estate market but has also been observed in most real estate markets in advanced economies, an aspect we analyse in detail in the article «The impact of the pandemic on international housing markets: is there a risk of overheating?» in this Report.

Among the factors behind this resilience of prices during the pandemic are the solid starting position of households (i.e. low aggregate debt), a housing market without excess supply and a decisive economic policy response, deployed through a wide range of instruments that have enabled households to maintain their income. Financing conditions for loans for house purchases also remained broadly accommodative. Prices were even more resilient in the case of new housing, thanks to two additional factors. Firstly, because a large proportion of the purchases made last year were, in many cases, transactions that had been undertaken prior to the pandemic. Secondly, prices have also been supported by the relative scarcity of new housing in the face of growing demand for this type of residence, more in line with the new preferences of buyers due to location, more space, higher sustainability standards, etc.

The growth in house prices is slowing but they are still remarkably resistant to falling

Last actualization: 06 August 2021 - 13:07

The most recent data, corresponding to Q1 2021, show moderate but sustained rises in house prices. According to the National Statistics Institute, these rose by 0.5% quarter-on-quarter in Q1 2021, although in year-on-year terms their growth continued to slow down (0.9% compared with 1.5% in Q4 2020). The prices of new builds slowed sharply to more sustainable growth rates (from 8.2% in Q4 2020 to 2.3% year-on-year in Q1 2021), although they are still rising faster than for second-hand housing (0.7% year-on-year in Q1 2021).

Similarly, the repeat house price index published by the College of Registrars rose by 2.1% quarter-on-quarter in Q1 2021 (1.9% year-on-year), while the appraisal value of free housing provided by the Ministry of Transport, Mobility and Urban Agenda advanced by 0.2% in Q1 2021, matching its figure for the previous quarter. In year-on-year terms, house prices slowed down their rate of decline (–0.9% compared with –1.8% in Q4). The price indicators published by different real estate portals and other agents in the real estate market suggest that the recovery in house prices continued in Q2 2021. At CaixaBank Research, we expect house prices to continue posting moderate but steady gains, perhaps growing by slightly more than 1% in 2021.

Adjustments in house prices have been very limited

and we expect them to continue posting moderate but steady gains.

The rental market: much harder hit, especially in large cities

Rental prices are usually more flexible and adjust more quickly to the economic situation than purchase prices. According to the indicators available on various real estate portals, rents have fallen more sharply in Spain as a whole (according to Idealista, they had fallen by 5.6% year-on-year in June 2021). This adjustment has been more acute in the larger cities (–13.2% in Barcelona and –12.4% in Madrid), although the most recent monthly data show rents stabilising at this lower level. 

One factor affecting the reduction in rents during the pandemic is the notable increase in the amount of rented accommodation available, resulting from properties that had been destined for tourist rental being transferred to the traditional residential market.12 Now that the end of the current health crisis is in sight and the tourism market is starting to pick up, we expect this situation to readjust again, swelling the supply of rented accommodation for tourists, albeit within moderate parameters as there is still a great deal of uncertainty regarding how quickly tourism will recover.

On the supply side, the shortage of rental accommodation is encouraging the development of Build to Rent (B2R) projects, i.e. the construction of whole buildings for rent. These developments are currently concentrated in the major capital cities and their outskirts, i.e. those that tend to have the highest demand for rented accommodation, but this kind of business has evident growth potential given the growing trend in the proportion of households living in rented accommodation.13 We look at the recent trends in residential investment in this Report, in the article «The impact of COVID-19 on commercial real estate investment in Spain and its high demand potential».

  • 12. According to a study by, last summer 20% of the tourist rental accommodation on offer in Spain had changed to residential, a trend that is gradually reversing in 2021: since January 2021, 2% of the residential rental supply in Spain has swapped to tourist rents. A study by Fotocasa in April estimates that 84% of the flats for rent are for residential use and only the remaining 18% for holiday rentals.
  • 13. In 2020, 17.3% of Spanish households lived in rented accommodation, a slight decline compared to 2019 (18.3%) but a clear rise if we take a medium-term perspective (16.1% in 2013) which becomes even more marked over a long-term perspective (less than 10% in 2001).
The real estate sector will be boosted by the European Next Generation EU funds

In contrast to the previous crisis, the construction industry could be a lever for growth in the current recovery thanks, in part, to the many different investments and reforms proposed by the Recovery, Transformation and Resilience Plan (PRTR), which has already been approved by the European Commission. This includes a package of investments and fiscal measures aimed at the sector totalling 6.82 billion euros over the period 2021-2023.

Next Generation EU funds

will spur economic recovery and help to tackle the major challenge of climate change.

Within component two of the PRTR, consisting of the implementation of the Spanish Urban Agenda, 3.42 billion euros will be allocated to renovating housing and the economic and social renewal of residential environments. The grants will be conditional and proportional to the energy savings achieved by each project, in order to encourage comprehensive renovation and improvements in the energy efficiency of Spain’s housing, currently among the oldest in Europe.

An additional 1 billion euros have also been earmarked for the construction of social rented accommodation in energy-efficient buildings, a much-needed measure to improve the stock of public housing with social and/or affordable rents. In fact, Spain has one of the smallest supplies of such accommodation in Europe: social housing accounts for 2.5% of the total number of main residences in Spain compared with a European average of 9.3%, according to Eurostat data. To reach the European average, 1.2 million additional social housing units would be needed, a figure that would be difficult to achieve without public-private partnerships.14

  • 14. For more details, see «NGEU: an opportunity to relaunch Spain’s real estate sector», available at

Urban renewal and regeneration plan

Distribution of the funds (million euros)
Urban renewal and regeneration plan