We thought last year’s robust market would lead to price rises of 3% to 6%. We hit the nail on the head!
In 2023, the Spanish real estate market is expected to become more stable, and prices may even fall. This paper will illustrate why experts’ divergent predictions for the Spanish home market’s price movement reflect the increased uncertainty about the economy’s future course. The good news is that it is predicted to be one of Europe’s most successful marketplaces in 2023 by a number of analysts.
After years of weak monetary policy and the conflict in Ukraine, inflation is back and should be with us for a while, making it the central issue if you want to understand the real estate market. That’s something we’ll have to deal with. In our analysis of the Spanish real estate market for 2022, we identified these concerns early last year. Therefore, this does not come as a shock to us. We were awestruck by how massive the changes were.
This study will provide you with our comprehensive forecast for the Spanish real estate market, as well as the insights and opinions of our network of local experts and partners located around the country. While there won’t be quite the same level of growth in the industry as there was in 2022, there will be more chances available. Don’t worry; we’ll break down exactly why the Spanish property market hasn’t experienced a repeat of the 2008 bubble burst.
Finally, we explain why we expect Spain’s economy will outperform that of other European countries during the next five years. This good news should maintain the robust status of the Spanish real estate market, at least in comparison to other European real estate markets.
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In 2023, buyers will have the upper hand in Spain’s real estate market.
In 2023, pay attention to these key indicators:
- Consumer buying power as measured by mortgage inflation
- Spanish and European economic activities
- Distant employment
Naturally, as always, what will tourists from other countries do in Spain in 2023?
Yes, I’m afraid we have some unpleasant news to share: inflation has returned. This is why the cost of borrowing money in both the short and long terms has increased. Mortgage rates are thus considerably higher now than they were a year ago. At the very least, we anticipate this position to persist for the next two years. Mortgage financing of real estate will become more difficult, and the Spanish economy should cool down. We believe the Spanish real estate market will stall for these two key reasons in the near future. The good news is that when adjusted for inflation, current mortgage rates are reasonable.
Is there a chance of a significant drop in home values, as we saw in 2008?
Many professionals disagree, since:
- For most Spaniards, the ratio of real estate expenses to income is reasonable.
- The amount of debt is manageable.
- Lessening of Building Firms’ Bargaining Power
- There is not an overabundance of newly constructed homes hitting the market.
Since present property prices in Spain are not overextended, the simple answer is no, we are not at risk of a large price fall so long as the economy continues steady. To learn more, check out our quarterly report: When compared to other global markets, Spanish real estate prices are still quite affordable.
For now, the major threats we foresee are:
- The Federal Reserve, the European Central Bank, and other central banks are all actively increasing their short-term interest rates.
- Interest rates over the long run are rising.
- Central banks throughout the world are responding to rising inflation by increasing interest rates.
- The fate of the Chinese economy rests on the country’s handling of Covid, the real estate market, and the sluggish economy.
- High inflation rates are putting pressure on consumers throughout the world.
Among the encouraging indicators for the Spanish property markets are:
- When compared to other countries’ property markets, Spain’s are relatively affordable, and mortgage rates are far below the country’s current inflation rate.
- Investors may find real estate to be a useful inflation hedge.
In light of current high energy prices, we expect Spain to maintain a competitive advantage for the foreseeable future.
The future of Spain’s real estate sector looks bright for a number of reasons
- Spain is a “Owner” country, with over 75% of its citizens owning their own house, which has led to a shortage of rental homes.
- Supply won’t be easily forthcoming, and building prices are growing along with inflation.
- The majority of Spanish homes are rather ancient, and some of them require extensive renovations before they can be put back on the market.
Read our quarterly report on Spanish property prices for additional information on why Spanish real estate is reasonably priced.
We informed you in the article that despite the energy crisis in Europe, Spain has some of the lowest utility rates in Europe and that we expect this to continue into the foreseeable future. As a result, the Spanish economy should continue to be more robust than that of many other European nations. The real estate market will receive significant reinforcement from this. It’s possible that in the not-too-distant future, some businesses may move to Spain. The return on investment for Spanish buy-to-let properties is attractive.
Buying new or Selling Spanish Property in 2023?
While we don’t anticipate major price reductions, customers who are able to pay in cash should be able to negotiate for discounts on resale projects. Given that building costs are higher and the Spanish housing market is strong and not oversupplied as it was in 2008, we do not anticipate massive reductions for newbuild – we have some great deals on newbuild houses from our partners, simply contact us directly -. New construction possibilities may arise in some areas due to an increase of available properties.
Good news for Spain in the long run!
Spain has various advantages over other EU nations in terms of competitiveness:
- Spain has fairly affordable utility costs, especially when compared to the rest of Europe. Check out our in-depth article for additional information: When compared to the rest of Europe, the price of utilities in Spain is up to 75% lower.
- Spain is at the forefront of the renewable energy movement, with plans to generate 100% of its electricity from green sources by 2050.
- Spain’s long-term advantages—including its qualified labour at low cost—could make it one of Europe’s economic and industrial powerhouses.
- The International Monetary Fund (IMF) agrees with us and forecast 4.6% economic growth for Spain in 2022 and 1.2% growth for 2023 in a study issued in November. This made Spain one of Europe’s fastest-growing nations.
For this reason, we anticipate that the slowing European economy will have a negative impact on the Spanish real estate market. We believe that the Spanish real estate market will continue to be stronger than the European average if we compare it to international markets, see where it is now (below €1,800 per square metre), and add the short-term and long-term advantages of Spain.
Since we do not expect inflation to abate anytime soon, mortgage rates remain low for real estate investors, and rent indexation might mitigate some of the inflationary consequences (though not all, due to legal constraints). In light of the current economic climate, that’s not a bad result. Check out our other posts on Spanish properties on our website esalesinternational.
