Analysis of the year and real estate industry predictions for 2024 in Spain

The Spanish real estate market in 2023 experienced a paradox with declining mortgages and transaction volumes. Yet, prices continued to rise due to higher demand and limited supply. 

The Housing Law, aimed at addressing rental issues, inadvertently reduced supply and spiked prices, shifting many from permanent to seasonal rentals, and exacerbated difficulties for renters, particularly families.

Home prices in Spain increased by 7% overall, with sharper increases in dynamic markets like Madrid, Barcelona, and coastal areas, including our home Province of Alicante, driven by international demand. Large cities remained key demand sources, but a shift towards suburbs was noted. 

In Alicante, prices rose by 15% and remained at 14% in Valencia. With active demand, a growing number of households and dwindling supply, price pressures are expected to rise in 2024 in the most dynamic markets, while other areas of Spain are likely to see stabilisation or slight declines.

Additionally, the current global economic situation is changing the distribution of Spanish property sales among different nationalities, favouring European buyers who traditionally have a higher disposable income.

This shift in demographics has affected house prices throughout the last year, and the effect is expected to continue to shape property values in 2024.

A lack of new build properties

To complicate matters further, the shortage of new build developments across the Spanish coastal regions continued to buoy property prices nationwide throughout 2023.

An increase in the cost of fittings and materials for new homes resulted in developers finishing fewer properties, delaying the construction of developments, and delivering fewer new build homes than had been expected.

The result is increased asking prices and longer lead times for new build properties in the most sought-after areas, placing an additional burden on the resale market and maintaining higher prices for secondhand homes.

Despite interest rate hikes, demand remained robust enough to sustain rising prices. Over half of property transactions were completed without mortgages, facilitated by buyers owning other properties.

The transaction count for 2023 is expected to fall slightly below 600,000, a drop of 8-10% from the previous year, yet remains one of the best years in recent history. 

The forecast for 2024 suggests a stable scenario without significant new housing supplies in high-demand areas, potentially leading to increased market stress and price rises.

The effects of the rental market on house prices

Mortgage signings decreased by over 25% in 2023, with a rise in mixed mortgages (fixed initial terms). Banks continued to offer competitive mortgages despite increased financing costs, and this trend is expected to continue into 2024. However, banks may become more restrictive depending on economic conditions.

Euribor's behaviour remains unpredictable due to the European Central Bank's rate decisions. The market faces uncertainties like high inflation and geopolitical issues, making significant Euribor decreases unlikely until at least the second half of the year. Households with variable mortgages should not expect considerable repayment reductions before 2025.

Rental market issues intensified in 2023. The housing law led to a reduced rental market, with rent prices increasing by 9.2% overall and more in major markets. 

The supply of permanent rentals dropped by 12% nationwide, impacting availability. Seasonal rentals gained popularity and now constitute a significant portion of the market, further limiting long-term rental options and escalating prices.

Despite a prediction of declining sales, the leading real estate services company, Solvia, foresees a 2.5% increase in house prices throughout the 2024 fiscal year.

BBVA, one of Spain's largest lenders, is forecasting a 3.0% average increase in house prices during 2024, adding to a majority of industry sources citing modest increases in the forthcoming year.

Looking for something beautiful? This exclusive luxury villa in Villamartin boasts a magnificent garden with private pool. The extensive three-bedroom property offers a Mediterranean living space, a private roof terrace, and a fabulous location. On the market now, take a look at the property listing and more photos.