Unlike many other eurozone countries, the Spanish property market continues to grow. Despite the impact that higher interest rates have had on it, there has been a steady increase in domestic and foreign demand for properties located in the major cities and on the Spanish coast.
It is worth investing in property in Spain
According to the latest figures, published by Eurostat, property prices in Spain rose by 2.1% quarter-on-quarter in September, compared to an increase of just 0.1% in the euro area as a whole. It is worth noting that in several countries, including Germany, France and the Netherlands, property prices recorded a decline in the second quarter of this year compared to the previous quarter.
While property prices in the eurozone fell for the first time in a long time (by 1.7%), property values in Spain rose by 3.7% year-on-year. Despite the challenges, Spain’s property market is still holding strong and remains at a high level compared to the rest of the euro area.
Unchanging demand for property
According to data from the Instituto Nacional de EstadÃstica, the number of mortgages issued in July 2023 was 18.6% lower than in the same period in 2022. The number of transactions also fell, being 10.1% lower in July than a year earlier. However, the downturn is not as strong as in other countries – especially if we pay attention to the fact that 2022 was a period in which the Spanish property market reached historic highs. Today, we are still experiencing results that are among the best in 20 years.
What makes the Spanish property market so strong and property prices are not declining? There are several factors, and these include:
- Continued strong growth in the number of Hispanic households, partly driven by immigration, among other factors.
- Stronger economic growth than the eurozone average – according to a forecast by ING analysts, the Spanish economy will grow by 2.5% in 2023, compared to an average eurozone growth of just 0.5%.
- The increase in nominal wages and lower inflation, which have also resulted in real wage growth returning to positive levels, and Spanish households are now gaining purchasing power.
- Strong foreign demand for Spanish property. During the pandemic it almost completely disappeared due to travel restrictions, but has now returned with full force.
- The purchase of property in Spain, especially in coastal areas (Andalusia) or islands (Balearic and Canary Islands) by foreign investors, with their own funds and without credit support. In this way, they invest and secure the capital they have accumulated.
Interest in property in Spain continues to grow
Current developments in the Spanish property market shed light on the unique challenge of balancing growing demand with supply. Flats and houses on the Iberian Peninsula have long attracted the attention of both Iberian residents and international investors – looking for rental units and second homes on the sunny coast.
The COVID-19 pandemic and the increase in interest rates or material prices introduced delays in new construction projects. As a result, the market has not always been able to meet the growing demand for new properties. However, looking at the incoming news of work on new residential complexes in the Malaga region and on the Costa del Sol, one can venture to conclude that the southern Spanish area will want to meet current and future market demand as much as possible.
