Unprecedented demand means that Spanish property prices are close to their highest level on record. In Q2 this year, house values reached 146.6 points, just marginally below the 2008 historic height. As a result, analysts believe that prices at the end of 2023 will be on a par with those set 15 years ago.
Prices soar in three years
According to the Spanish Institute of Statistics (INE), the index for Spanish property prices stood at 146.6 points at the end of June. The figure stands just short of the index’s record of 151.72, set at the height of the previous property cycle in Q3 2007.
The current figure illustrates the speed at which the Spanish real estate market has moved over the last three and a half years. Since early 2020, prices have soared by 20 points on the index, one of the biggest hikes on the index.
Based on the latest data, analysts believe that Spanish real estate will be similar to 2007 levels at the end of this year.
Some areas already more expensive
However, the latest statistics also show the different speeds of the market, with significant differences in Spanish property prices depending on the region. In addition, some parts of Spain now have considerably more expensive property than in 2008.
In the Balearic Islands, for example, the index currently stands at over 160, 20 points more than in 2008. The Costa del Sol is another case in point, with real estate prices at higher levels than 15 years ago.
New builds behind the rise
Lack of supply in the new-build sector is one of the causes of the recent hike in Spanish property prices. New homes went up by 7.7% in the year to June and by 1.7% in the quarter.
Fewer than 100,000 new builds enter the market every year, a level that fails to keep pace with demand. New construction has not recovered in Spain since 2008, and analysts claim that the building rate currently sits 6 times lower than 15 years ago.
Resale Spanish property prices more moderate
Despite soaring prices in the new-build market, resale home values have experienced a more sustained trajectory. Their price index stood at 143 in June this year, 17 points below its peak in 2008 when it stood at 160.
However, resale values continue to rise, marking a 2.9% year-on-year increase in June. As a result, average square metre prices stood at over €2,000 at the end of August.
Fewer mortgages but more cash purchases
At the start of 2023, property experts predicted a moderation in Spanish property prices throughout the year. They forecast increases below the inflation rate, mainly because of rising interest rates. As a result, the recent house price increases have caught many by surprise.
The sustained upticks in the Euribor have certainly slowed mortgage applications in Spain. In June, they fell by 25% and stood at levels last seen in 2019. Sales, too, have dropped.
However, cash purchases have risen and currently account for around half of all transactions, considerably higher than the historic average of 30%.
(Source: Cinco Días)