Expected decrease in the real estate market in Spain this year..

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A decline is expected in the Spanish real estate market

The Spanish real estate market is expecting a downturn due to rising interest rates and stricter lending conditions. However, a crash similar to what we saw during the financial crisis is unlikely. The market is still forecasted to outperform the eurozone average due to increasing demand.

Housing prices will stop rising in 2023.

Housing prices in Spain are not expected to rise next year, despite a sharp increase in interest rates and economic uncertainty. Prices are expected to remain stable throughout 2023, possibly with a slight decrease in the first half of the year. Inflation-adjusted housing prices are anticipated to drop by 7% over three years, from 2022 to 2024.

Slowing down of housing price growth

The rise in housing prices in Spain is already slowing down. Prices have decreased the most along the Mediterranean coast and in the Balearic and Canary Islands, where housing prices increased by 4.5% and 3.4% respectively in February compared to last year. In urban areas, prices continue to rise at an annual rate of 7.9%.

The demand for real estate remains strong.

The demand for real estate in Spain remains strong despite the rise in mortgage interest rates.

Increase in mortgage interest rates

Mortgage interest rates in Spain are expected to continue rising in 2023. The sharp increase in interest rates has led to higher borrowing costs. The share of new fixed-rate mortgages has risen to more than half of all loans. It is anticipated that mortgage rates could exceed 4% in the second half of the year, while fixed rates may rise to 5%.

Weakening demand in 2023

A gradual weakening of demand for real estate in Spain is forecasted for 2023. Rising interest rates, slowing economic growth, and high inflation will impact demand and housing price growth. The effects that stimulated demand last year are expected to lose strength this year. A tightening of credit conditions is also anticipated, which will further weaken demand.