Analysis of the property market in 2023 and what is expected of 2024.

2023 will end with a conflicting balance on the real estate market. Mortgages Fall, Sales Stagnate While Prices Continue to Rise! This may seem strange, but prices are driven by an ever-increasing demand and a decreasing supply.

The new housing law has not met the goals the government had planned, and it has had a devastating opposite effect: it sought to solve the rental problem but has instead made it even more difficult to be a renter. The new regulation has lowered the supply, and prices have continued to rise sharply. Furthermore, it has generated a significant shift from permanent rentals to seasonal rentals making it even more difficult for families to access housing, especially those with minors. With the current political environment, it is impossible to predict whether these trends will change in 2024.

House prices

The price drops that many predicted for this year have not come, on the contrary, the price of homes in Spain has increased by 7% on average over the past year.

In some very dynamic markets like Madrid or Barcelona, prices had already reached very high levels, which makes their increases more moderate and closer to inflation.

The upward trend has been much more marked in the Mediterranean area and in the Balearic Islands. This upward trend is undoubtedly driven by international demand and high purchasing power.

In the provinces of Alicante and Palma de Mallorca the price increased by 15%, while it remained at 14% in Valencia and 13% in Malaga. With high demand for coastal housing and declining supply, price tensions will continue to rise in 2024 in the most sought-after markets, while inland we may well see a stabilization or a minor drop in prices next year.

The housing sale

2023 closes with just under 600,000 homes sold, which will mean a very significant drop in sales of between 8% and 10% compared to the previous year.

Nevertheless, the sales figures in the first three quarters were high and were 19% above the first 9 months of the year 2019 and at the same level as the number sold in 2017. 2023 is measured by the number of homes sold is still one of the best years if we look back at over the past 15 years.

In 2024, it is most likely that we will continue the trend from 2023 with low rising prices for housing in the popular areas along the coasts where there is the greatest demand.

However, it is possible that during the next year we will experience that many of the buyers who have held on to the money in 2023 in the hope of a price drop that has not occurred will become active and buy before prices rise further. This could increase tension in the market and push prices up faster than expected.

Mortgage loans

The number of mortgages signed has suffered a significant decline and is expected to close 2023 with a decline of more than 25% year-on-year. The reason for this must primarily be found in the rising interest rates that have made it more expensive to borrow money to buy a home.

Despite the increase in financing costs, the banks have not given up and continue to compete among themselves to offer the most competitive mortgage loans to customers who meet the criteria.

In 2024, we hope and believe that this competition will continue between the banks, and we believe that we will see a negative interest rate trend in the form of falling interest rates during the first and second quarter. We believe that the banks will continue to be restrictive in their lending policy, which is good for the market as a whole, in the long run.

Euribor

The ECB's recent decisions on interest rates have made it very difficult to predict the behavior of the 12-month Euribor. Although there is already a general trend towards lowering interest rates, we predict that this will happen in the medium term. We may well see a new increase in the first part of the year before the market starts to adjust again.

In recent weeks, the index has experienced a pause in the increases and even some small decreases, but this does not necessarily mean that we are facing a trend change. The market still has too many uncertainties that do not support an imminent fall in the index. These include inflation, which is still at relatively high levels, the geopolitical situation, the arrival of winter and the resulting increase in energy demand, wage increases, or the measures taken by the various governments to counteract the effect of inflation.

Conclusion

Based on the above, we (homes-abroad.com) believe that it is only advisable to invest in housing in Spain as soon as the opportunity arises. If you find a home that has everything you dream of, go for it. The sellers are willing to negotiate (otherwise we will probably have to get them to the negotiating table!) and in 2023 an average discount of 8% was given compared to the offered sales price. Sometimes as much as 15% for a quick sale!

However, it is absolutely necessary as a buyer to have the financing 100% ready, so that an offer can be submitted immediately when the dream home has been found. If not, there is a very high probability that it will be sold elsewhere, as buyers are queuing up for the attractive homes.

Have a conversation with your own bank if there is an option for a loan in equity as well as with one of our good partners which are specializes in mortgage loans in Spain early in the process.  We can help you take offers from Spanish banks, so that the price and product can are compared and held up against each other.

Written by,
Christian Boesen
Owner/ Director
Homes-abroad.com - Spain The Specialist