Outlook for the Spanish property market in 2024

Outlook for the Spanish property market in 2024

After a bumper year for sales in 2023, real estate transactions in Spain have dropped this year. However, prices have remained stable, and many locations have seen steady increases since January. With interest rates showing no immediate signs of dropping, what’s in store for the Spanish property market in 2024?

In this article, we look at the predictions from the main players in the sector and summarise their expectations for the next 12 months.

Spanish property prices in 2024

In general, analysts predict price stability over the next year, a trend much in line with 2023.

What prices did in 2023

Historically, higher interest rates put the brakes on house price increases. However, despite rates reaching 4.5% in 2023, real estate in Spain has not lost its value. On the contrary, most locations have seen upticks at least in line with inflation.

In its latest monthly report, Tinsa’s property index reports a 4.3% rise in Spanish property prices in the year to October. Real estate in the Balearic and Canary Islands saw a 7.7% annual increase. Nevertheless, the underlying trend is one of moderation.

What they’ll do in 2024

The European Central Bank (ECB) shows no sign of bringing interest rates down drastically over the next few months. As a result, the mortgage market in Spain will continue to be tight, acting as one of the constraints on property prices. Predictions for 2024 are as follows:

·         The BBVA predicts a 3% rise in property prices next year, with the caveat that after discounting inflation, this increase will amount to a 0.6% decrease.

·         The University of Barcelona, quoted in Business Insider, expects a more pronounced price dip, specifically 3% when adjusted for inflation.

·         Bankinter analysts quoted in El Mundo broadsheet forecast a correction of 2% in Spanish property prices next year.

·         On the other hand, Fotocasa believes prices will remain stable on the back of a solid job market, high demand among solvent investors and foreign buyers and lack of supply. The property portal also points out that average prices still remain 22% below their 2007 peak.

Sales in the Spanish property market in 2024

2022 registered the highest number of transactions since 2007, the peak of the last property cycle. Nearly 720,000 homes changed hands as demand soared. Sales in 2023 have been consistent but not on the same scale because stringent lending conditions have constrained demand. According to the BBVA, sales in 2023 will be similar to those in 2019.

Analysts believe that 2024 will see a repetition of this downward trend, with up to 10% fewer sales.

Supply of property in 2024

Low inventory levels will continue as another constant in the Spanish property market in 2024, according to experts. The BBVA highlights the shortage of new homes as one of the main market characteristics, both this year and next.

Analysts quoted in El Mundo refer to this lack of supply as “chronic”, particularly in highly sought-after locations. They include Spain’s largest provincial capitals, suburbs around the main cities and tourist areas, where foreign buyers have set the market pace over the last few years. The latter include the western Costa del Sol, the Balearics and parts of the Costa Blanca.

2024 in a nutshell

Key takeaways for next year include:

·         Stable prices, with possible upticks in areas with high demand.

·         Sales levels on a par with those in 2019.

·         A continuation of high interest rates.

·         An even wider gap between supply and demand.

(Sources: BBVA, Tinsa, Business Insider, El Mundo)