What will the Spanish housing market look like in 2023?
- Will foreign homebuyers continue to come to Spain?
- Will we be faced with falling prices because mortgage interest rates have risen sharply?
- Or are house prices rising in Spain because building materials are much more expensive?
- Will the high demand for homes in Spain, as in 2022, continue in 2023?
There are still many questions that come to mind if you plan to take the step to buy a house in Spain in 2023.
Looking to the future
Looking to the future remains difficult. Besides the fact that predictions are often wrong, they are almost always negative. Still, the forecasts can be astonishingly accurate if you consult multiple reliable sources.
Forecast for the year 2023
The picture of the Spanish housing market for the year 2023 will be determined by 3 important factors.
- Rising interest rates
- Construction costs
The combination of the 3 factors mentioned above will usher in the year 2023. Its effect will be felt in the Spanish housing market during the further course of the year 2023.
Rising interest rates
The increase in the European base rate, the Euribor, by the Central Bank of Europe to curb inflation will be felt. The banks pass on this increase in the interest you have to pay for the mortgage you take out to buy a home.
In recent years, many people have opted for mortgages with a fixed interest rate for a term of 10 to 15 years. Now, a mortgage with a variable interest rate is being chosen more often.
Prices for new construction, fueled by the strong demand for housing and by the rise in material prices, form a separate chapter.
Only if inflation comes under control quickly can we return to a normal level of construction costs.
According to experts from the construction industry, the increase of the past two years will be reversed from 2023, until we return to the old price levels in 2025.
In any case, prices for new-build houses will also be determined in the year 2023 by the increase in the price of building materials.
New-build projects are therefore relatively expensive compared to existing homes. Demand for existing homes will also remain strong in 2023.
A stable property market is based on confidence in the future. The Russian invasion of Ukraine has caused a huge dent in that confidence in the future. A speedy resolution of the conflict is of great importance to all parties, especially for humanitarian reasons alone.
Declining number of home sales expected in 2023
The year 2022 was a record year. The number of homes sold was 665,754 units. That number was 2.3% higher than the year 2021, which was also a record year in itself.
The number of home sales in Spain is expected to be about 15% lower in 2023 and that the counter will get stuck somewhere around 560,000. The reason for this is the higher mortgage interest rate.
The higher interest rate could drive about 35% of would-be buyers out of the market. This logically causes a drop in the volume of the number of home sales.
House prices in Spain will remain virtually the same in 2023
The price level of the Spanish property market always reacts rather slowly to adjustments in relation to demand and the volume of house sales. There is therefore always a considerable adjustment backlog in the prices of the houses.
If the factors we are facing now do not change- inflation continues to rise and the instability caused by the war in Ukraine continues, house prices will be slightly lower by the end of 2023.
It is expected that the square metre price will ultimately be approximately * € 1,690 per m2 at the end of 2023.
This would mean a decrease of 0.9% compared to the year 2022.
For comparison, the average price per square in 2022 was *€ 1,706 euros. And that was 2.9% higher than the figure recorded in 2021.
* the price per m2 is the average of all prices throughout Spain for existing homes.
Looking back at a series of years in which the Spanish housing market has fallen, you can see that the numbers sold initially fall much faster than the prices.
Fewer people are buying but the price remains resilient. In the long run, the price eventually falls, but to a lesser extent.
Spain by region
House prices in Spain differ greatly per region and also per segment.
- Existing homes or new construction
- Regions with more or less available homes
- Urban areas or in the provinces
- The Spanish coasts or the interior
Everything influences pricing. That is why it is impossible to include everything under one heading.
The top 5 of the largest property markets in Spain
The top 5 of the Spanish housing market remain the large urban areas of Spain such as Madrid and Barcelona, and on the Mediterranean coast, Alicante, Valencia and Malaga.
Despite the fact that the positive mood in the Spanish housing market will diminish in the first part of the year 2023 due to economic uncertainty, prices will remain positive in the regions mentioned above.
In these areas, this is especially true in the existing housing market for 2 reasons:
- Higher demand than supply
The supply in the areas of Madrid, Barcelona, Alicante, Valencia and Malaga is still not able to cover the current level of demand. As a result, house prices in these areas will continue to develop positively, despite the fact that the number of sales transactions will also decrease slightly in 2023.
Investors seeking protection from inflation will seek refuge in highly-rentable Spanish properties in these areas.
Price development in the top 5 areas from Spain
The year 2022 will close with a price increase percentage of between 3 and 5 percent on an annual basis. That price increase will level off slightly in 2023, but will still increase to a plus of 1.5 to 2.5 percent.
- Rising interest rates will cause a fall in the number of property transactions in 2023
- Demand for existing homes will remain strong in 2023
- New construction projects are relatively expensive due to the increased prices of building materials
- Price development 2023 average across Spain: decrease 0.9% compared to 2022
- Price development 2023 in the Spanish top 5 areas: plus 2.5% compared to 2022.
Rinus van Vliet - Houses In Spain -
Sources I have consulted for this article: the Spanish Statistical Office, publications of the professional association of Spanish notaries and publications in the Spanish media.