Property prices in Spain in 2021

Predictions from property market experts about house prices in Spain in 2021 in the midst of the coronavirus pandemic show that prices in Spain are expected to drop, but not in all cases.

Will house prices drop in Spain in 2021?
Will house prices drop in Spain in 2021? / Gtres
22 February 2021, Redaction

Will house prices drop in Spain in 2021? Is 2021 a good time to invest in property in Spain? These are just some of the questions on the minds of those planning to move to Spain in 2021, but who may have put plans on hold due to uncertainties such as Brexit and the coronavirus pandemic. With some experts stating that price drops are on the cards in the Spanish real estate market and that now is a good time to buy in Spain, we're here to give you the full picture of predictions from property market experts when it comes to property prices in Spain in 2021

The evolution of the health pandemic won't always mean price drops

The immediate future of housing in Spain is linked to the evolution of the health pandemic and mass vaccination of the population. At a time of maximum uncertainty, the market is expecting the first half of 2021 to be unstable, although experts are confident that economic and real estate recovery in Spain will begin in the summer.

Does this mean that we will see big falls in house prices in Spain in the coming months? This may certainly be the case in some areas, but not entirely. According to property market experts on the topic of Spanish house prices in 2021, the outlook for new-build housing in Spain is much clearer than that for previously owned properties. This is a market that is likely to see higher price variation and will depend mainly on the location of the properties and the harshness of the confinement measures in the most recent COVID-19 wave. 

Stability in new homes and developments, and even price rises

Most experts agree that in the short term there is no sign of new-build homes in Spain becoming cheaper, while this type of investment has Spain has many advantages given the current situation

Mikel Echavarren, CEO of the consultancy firm Colliers, explains that "new-build housing in Spain is not going to fall in price. Its better qualities, the possibility of structuring the purchase over several years and its better financing will allow current price levels to be maintained". The same theory is defended by Sandra Daza, Managing Director of Gesvalt, who believes that the trend we have already seen in 2020 (when the prices of new developments in Spain hit decade highs) will continue, at least during the first few months of 2021. According to Daza, this "may be due to the fact that new-build housing has adapted better to the needs of people in Spain after the pandemic, offering a greater number of bathrooms, larger terraces and an increase in the quality and specialisation of communal spaces and services".

Greater impact on pre-owned housing in Spain

In the case of used or pre-owned housing in Spain, experts do expect more significant price changes, although not always in terms of falls. In general terms, the location, the lockdown measures applied by each region in Spain and the type of property will be the main factors that will determine the evolution of prices, as well as the large oversupply accumulated over the last few months.

"Pre-owned properties in Spain are anticipating price drops of between 5-10%, with very different behaviour between cities, with greater decreases in the areas most affected by the crisis in the tourism and hotel sector. In this sense, falls of more than 10% in some cities will coexist with price rises in others," says the CEO of Colliers, who adds that "unfortunately, the impact on employment is affecting temporary jobs, young people and lower incomes and therefore will not affect very significantly the solvent demand that purchases homes. As a consequence, the impact on prices will focus more on the homes of those families who are forced to liquidate part of their assets due to the adverse circumstances of their economy".

A recent idealista forecast also points to a slowdown in price declines in Spain, without ruling out an upward adjustment throughout the year in specific locations, while real estate agents foresee a scenario of stability, ranging from moderate falls to gentle rises. According to a survey carried out by Unión de Créditos Inmobiliarios (UCI) among more than 3,000 real estate professionals throughout Spain, 42% believe that prices will fall by between 5% and 10% across the board, while 29% expect rises of less than 5%.

House prices in Spain to change in the summer

The arrival of summer, therefore, is shaping up to be the moment when the course of housing prices could change in Spain. In this sense, Gregorio Izquierdo, Director General of the Institute of Economic Studies (IEE), explains that "housing prices in Spain this year will register fairly diverse behaviour that makes it difficult to speak of a market average". He stresses that there may be "significant differences, even with different signs, between products, segments and locations".

A good example of this can be seen in the forecasts that are being made for Madrid and Barcelona, and for other large cities with an important tourist industry or more focused on the industrial sector.

"The most notable changes are the 10% (or higher) price drops in the sale prices of properties in cities such as Palma de Mallorca, Alicante and Malaga, compared to the stability of prices and even increases in cities such as San Sebastian and Bilbao. Madrid and Barcelona are suffering hardly any significant drops in the price of pre-owned housing", emphasises the head of Colliers.

In the case of house prices in Andalusia, home to Spain's popular Costa del Sol, a traditionally dynamic and active region, the tightening of measures to control the third wave of the COVID-19 pandemic is having a direct impact on demand. "It is true that January and February are traditionally the worst months of the year, after a hyperactive December, but this year the number of calls to visit a flat in Andalusia has fallen by more than 30%, for example. We will see what happens in March, the month in which traditionally the proximity of Easter and summer mark the beginning of an important activity for real estate sales and purchases". In the case of the Balearic and Canary Islands, interest seems to be in 'standby' mode, awaiting the arrival of potential foreign buyers.

House prices on the Spanish coasts in 2021

In the case of homes located on the coast in Spain, marked by the demand for second homes especially for international buyers and expats, the scenario is still very uncertain for 2021.  

Gonzalo Bernardos from the University of Barcelona recalls that "the season for buying homes on the Spanish coast tends to be from the Easter until the end of September in most locations". For this reason, he considers that "2021 is already a lost season, even if 60% of the population has been vaccinated by June", as "those interested in buying will not have enough confidence to do so this year".

Sandra Daza also stresses that "the speed of the reactivation of international demand will be a determining factor in consolidating the recovery of prices at the end of 2021". And, as Mikel Echavarren reminds us, the Spanish coasts are the enclave of many European retirees "and these destinations have no competition considering the legal security and infrastructures that Spain has". For this reason, the CEO of Colliers states that "we believe that the first thing that will recover in the Spanish real estate sector will be second homes located on the coast".

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