REAL ESTATE – MARBELLA WOHNEN – Real estate market in Spain, what awaits us?

Real estate market in Spain, what awaits us?

Analysis and forecasts 2023

What is the current situation of the property market in Spain? What are the short and long term prospects? Will the price of housing fall? What will happen to the sales? Numerous specialists assure that the market is entering a change of cycle and we cannot agree more.

Our mission, however, is that you too are able to understand the ins and outs of the market in order to make intelligent decisions about selling your home. On this page we tell you what is happening in the real estate sector and we make some predictions for the real estate market in 2023. Will the price of housing fall?

What is the current situation of the property market in Spain?

The current situation shows that the real estate market is slowing down: prices are falling, sales are reduced and mortgage interest rates are rising. But how did we get here?

Covid effect and sales ‘boom’

You will undoubtedly remember that two years ago we were confined by the threat of covid-19. So, our expenses were reduced to the essentials: rent, food, utilities and some entertainment. The pandemic left us with a bitter taste, but it allowed many of us to save more than usual.

This accumulation of savings led to many families having the necessary money to get into a mortgage. In addition, at that time, the interest on the loans was very low (the Euribor —the index that establishes the price of most mortgages— was moving in negative numbers). In this line of events, a kind of euphoria to buy houses was unleashed and what many specialists call ‘the real estate boom’ began. In 2022, we broke historical records both in price and in the number of sales and, in general, reached figures not seen since 2008.

Energy crisis and inflation

But as we entered the ‘new normal’, something unexpected happened: Russia invaded Ukraine and, in addition to the dire humanitarian consequences, a global energy crisis broke out. The increase in the cost of energy added to the high demand for products and services that we are experiencing after the end of the confinement ended up triggering the cost of living: inflation exceeded 10% in August 2022 and began to reduce the real salary of families and your ability to save.

Interest rates and higher mortgage prices

Now, the story gets a bit more technical, but we’ll make it easy for you. Central banks have a tool to contain inflation: interest rates, which define the price of money. By increasing the rates, the interest on current loans (such as personal or mortgage) also increases. With more expensive credits, ordinary people will consider twice whether or not it is convenient for us to hire them. Many of us, in fact, will decide not to.

This is how central banks manage to reduce the global demand for products and services (less loans = less consumption) and cool down the economy, so that prices do not continue to rise exorbitantly. The European Central Bank raised interest rates four times in 2022 and twice more in 2023, from 0% to 3.5%.

The housing market cools

Believe it or not, everything we have told you determines the evolution of the real estate market in 2023. Why?

• With more expensive mortgages, fewer people can afford one.
• Inflation erodes the pocket and prevents us from saving enough to get into a mortgage
• Banks have tightened their requirements when granting loans to reduce delinquency

With fewer buyers in the market, the number of home sales has started to contract. 

Home sales forecasts

The number of sales fell 7.3% year-on-year in January, 13.1% in February and 11.7% in March, according to notaries. There are still no official data for April and May, but they are expected to continue along the same lines. What are the forecasts for 2023? This is what the statisticians say:

• A collapse of 15.4% in the number of sales is expected for 2023

Will property prices fall?

If sales fall, we could assume that house prices will also fall. However, the square meter increased by 7.3% year-on-year in March 2023. To understand this increase, we must take three things into account:

• Inflation: If there is inflation, the prices of all products and services rise, including housing.
• Law of Supply and Demand: If the demand for housing is higher than the supply, the prices go up. If supply exceeds demand, prices go down.
• Ukrainian War: The war produced increases in construction costs. In 2022 fewer homes were built than usual.

What will happen during the rest of the year? Everything indicates that the rise in interest rates and the increase in mortgage prices will mean that fewer families can buy a home (demand will fall) and, little by little, inflation will be contained (the prices of products and services will fall). . That is why house prices are expected to fall in 2023, but not by that much: the lack of new construction cushions the imbalance between supply and demand. The latest report from notaries, corresponding to March 2023, already shows a year-on-year decline in the price of bricks of 2.6%.

Why do we say that the price goes up and the notaries affirm that it goes down?

Our data represents the offer price, that is, the value at which the home is published on real estate portals. Those of notaries, on the other hand, show the final sale price of a home.

House price forecasts in 2023

We anticipate that prices will fall during the first half of 2023, although not much. Other experts agree with these forecasts.

• A drop in house prices of 3% for 2023 and 2% for 2024

The demand of foreign buyers breaks records in 2022

In the midst of so many changes in the real estate market, foreign buyers are breaking sales records. According to the Registrars, in 2022 they carried out 13.8% of the operations, the highest figure in the entire historical series.

You will wonder why this is happening. And it is that foreign buyers tend to have more solvency. Thanks to this, they do not request mortgages to buy houses in Spain, or rather, they request them for much lower amounts. In this way, they are less affected by interest rate increases than a national buyer. The good Spanish climate continues to motivate them to buy homes near the beach.

Marbella WOHNEN Immobilien is a highly qualified real estate agent in Marbella specialized in providing the best customer service and defending their interests

30 years of real estate sales experience in the Marbella and Costa del Sol market

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