While the Spanish property market enjoyed a bumper
year in 2022, the arrival of ever-higher interest rates has put the brakes on
activity so far this year. However, this deceleration phase is not expected to
last long, according to CBRE, and the buy-to-let sector continues to stand out
as an investment option.
Short-term deceleration
The latest report on the Spanish property market from CBRE Iberia reveals that 2023 has brought a period of “deceleration, characterised by a significant drop in sales and stable prices”. However, the property consultancy firm emphasises that this situation is temporary.
“We expect it to be short term, especially regarding the new-build market,” said Miriam Goicoechea, Head of Research at CBRE Iberia.
Continued surge in demand for rentals
Rentals are one of the sectors that CBRE highlights as one to watch this year. “The growing demand among households deciding to rent will continue to drive the buy-to-let residential segment,” said Goicoechea.
CBRE predicts that the number of households renting a home will reach 26.4% of the total by 2026. As a result, buy-to-let properties remain one of the darlings of investors in Spain, both private and institutional.
In 2022, the Spanish property market represented a bright spot for multi-family investment in Europe. Spain received 39% more investment in apartments last year, compared to an average drop of 23% in Europe generally.
Flex Living growing in popularity
This residential segment, which incorporates new solutions for temporary homes, attracts increasing numbers of investors. In Q1 this year, it captured 13% of residential investment, the equivalent of €154 million.
Corporate Living dominated transactions, with 81% of the total, and Coliving occupied a considerably smaller 19%. Around 90% of transactions took place in Madrid and Barcelona.
Luxury and branded residences increasing favourites
According to CBRE, the trio of luxury homes, branded properties and serviced apartments are gradually increasing their market share. They’re particularly popular in Madrid, Barcelona, the Balearics and the Costa del Sol.
“In the European and international context, Spain is increasingly more attractive, competitive and unusual, when compared to cities like Paris, London and Milan,” said Javier Kindelan, Head of Living at CBRE Spain. “The wide range of cultural and leisure options, together with an outstanding culinary experience, are factors behind the boom in this sector.”
Predictions for this year
According to Goicoechea, the continued uncertainty and interest rate rises will push prime yields higher in the Spanish property market in 2023. She reports that investment activity in the buy-to-let sector is centred in secondary locations and affordable products. Average returns tend to be over 4%.
(Source: CBRE)
