Rising interest rates slow Spanish real estate market, sales in first half of 2023 decline not as sharply as expected

The rising interest rate, which makes mortgages more expensive, has slowed the Spanish real estate market in the first half of 2023. According to the National Statistics Institute, 315,783 residential homes were sold in the first half of the year, down 4.5% from the same period in 2022.

The Spanish real estate market boomed a year ago and began to slow down towards the end of 2022. Experts describe the latest home sales data as "good" or "better than expected." Putting aside the two-year boom after the peak of the Covid pandemic, the number of sales is in line with 2008 levels, with more than 300,000 homes sold in the first half of the year in 2022 alone.

Jose Maria Alfaro, president of the Federation of Real Estate Associations (FAI), said: "With the Euribor mortgage rate rising so intensely by four points in a year, to talk about a decline in sales of less than 10% seems a more favorable situation than we predicted four or five months ago." Alfaro believes there will be a 10% drop in sales for the year, down from 650,000 transactions last year.

Havier Kindelan, head of consultancy CBRE, believes the decline will be much greater. "In total, the number of sales will be down about 24% by the end of the year," he predicts. "The market has behaved better than expected in early 2023, but we expect rising interest rates to have a greater impact on slowing sales later this year," Kindelan suggests.

The two experts agree that the market will shrink further over the next few months, according to data from notaries up to the end of June there was a 12.9% drop in transactions. Information from notaries reflects when a real estate sale is signed and usually has a two-month delay compared to official data on the sale of real estate.

Teresa Barea of the General Council of Notaries said: "The reduction in mortgage issuance means that there are people who cannot get finance to buy and there are also potential buyers who, because of the economic situation, decide to postpone their plans.

Realtors are also noticing that clients are putting off buying real estate, according to Jose Maria Alfaro.

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