Although we may think the luxury sector is somewhat immune to many national and global economic problems, it can also experience some recession. What will happen to luxury housing at the end of the year? Will there be more or fewer transactions? Will prices fall?
Fall in sales
Data provided by the INE indicate a 10.5% drop in the number of home transactions in July compared to the previous year, a fall which, unlike in the case of regular housing, Iñaki Unsain, Real Estate Personal Shopper and Managing Director of ACV Gestión Inmobiliaria, puts down to the lack of demand from luxury property buyers.
"These homes have a very high maintenance cost; the tendency to have fewer children and less need for space have contributed to the fact that the demand has fallen and the price has not increased significantly".
Overall, the expert anticipates that we will not see a significant difference from the level of luxury home sales we have seen throughout the year. "I don't think there will be a vast deviation in demand and price.
Along the same lines, Gonzalo Robles, CEO of Uxban, predicts that the number of luxury property transactions will continue to fall over the remainder of the year, following a similar pattern to that seen in the previous six months: "the supply on the market is absolutely insufficient to absorb demand. Recoletos has the lowest stock in the last five years".
Rising prices due to lack of real estate
There is also a lack of housing in the luxury sector. Usain states that there is likely to be a slight positive price variation in those sectors where land is limited, such as the most exclusive areas in the centre of Spain's main cities, and, therefore, where luxury housing is a very scarce commodity.
The expert predicts that by the end of the year, they may experience a rise in those areas where this type of housing maintains an active demand regardless of inflation. "There are always people with a lot of economic resources who want it".
Robles thinks that prices will continue to rise despite overheating in some areas, as long as Spain's macroeconomic outlook remains good for the end of 2023 and 2024. However, "There will be moderate rises between 3% and 4% due to an international profile that evidently does not require bank financing, which sees a liquid, low-risk market in areas such as Madrid".
However, according to Usain, buying without requiring external financing has made luxury homes an asset that has not been particularly affected in price by inflation. "The value of these assets is fairly stagnant in the market, and many owners offer good purchase prices if you accept a cash payment," he says.
He says that the European Central Bank's (ECB) interest rate hikes won't put a brake on luxury housing transactions. "Rising interest rates may tighten financing conditions in general, but people who buy luxury homes tend to buy outright, so they are not as affected by these changes".
Luxury housing in 2024
What will happen in the coming year? Gonzalo Robles, from Uxban, believes that the shortage of property will intensify the contagion effect in neighbourhoods that are good for national buyers but have not been considered top of the range up to now. Demand continues to shift to neighbourhoods less explored by the foreign public, such as Chamberi, Trafalgar, Centro or Argüelles, and Pintor Rosales in Madrid city centre.
For his part, Iñaki Unsain, Real Estate Personal Shopper, sees a very stable luxury sector, "which is why I don't foresee prices rising any further than they already are". We will see a good response in demand for well-located luxury assets in major cities such as Madrid, Barcelona and the Balearic and Canary Islands, where this asset is always in high demand.