Solvia forecasts fewer home sales, slight price rises and rising rent in Spain

The Spanish real estate agency Solvia forecasts that house prices in Spain will continue their upward trend in 2023, although with a moderating trend that will lead to end the year with rises of between 1.5% and 2.5%. This is according to the conclusions of the IV Solvia Market View 2022, published at the end of March 2023 by the real estate services company.

The behaviour of property prices in Spain throughout this year will follow the line observed since the fourth quarter of last year, when housing recorded its first quarterly decline after two years of increase.

Solvia recalls in its report that housing prices contracted by 0.4% between October and December 2022, compared to the previous three months. However, compared to the fourth quarter of 2021, prices in Spain rebounded by 5.3%. Prices of pre-owned housing accompanied the quarterly fall and contracted by 1.1% in the fourth quarter compared to the third, while, on the contrary, prices of new construction increased by 2.5% in the same period.

In its report, Solvia also finds differences by autonomous region and notes that there is still room for improvement in these markets, both upwards and downwards.

The business director of Solvia, Ernesto Ferrer-Bonsoms, believes that 2022 was "very positive" for the real estate market and predicts a 2023 of "stabilisation".

"The real estate sector will continue to be considered a safe haven for investors and, therefore, although a generalised adjustment is expected, the figures will continue to be higher than those achieved in the years prior to the pandemic," adds Ferrer-Bonsoms.

Between 800 and 1,500 euros per m2

Solvia's business director also recalls that the "characteristic feature" of the Spanish real estate market is "its high degree of heterogeneity by territory".

The regions with the largest price falls in the fourth quarter of 2022 were Extremadura, with 10%, La Rioja, with a 7% drop, and the Canary Islands, with a 6% adjustment. In contrast, the highest increases were in the Balearic Islands, with 6%, the Region of Murcia, with 4.5%, and Andalusia, with 1.5%.

In the breakdown by province, the most expensive m2 was paid in Guipúzcoa, the Balearic Islands and Madrid, at over 3,000 euros, followed by the more than 2,770 euros per m2 registered in Biscay and Barcelona in the fourth quarter of 2022.

The most affordable provinces in Spain, in the fourth quarter of 2022, were Ciudad Real, Badajoz and Cuenca, where the m2 was below 700 euros.

Despite the soaring prices in some provinces, or in the case of the latter three provinces, the price range in Spain is between 800 euros per square metre and 1,500 euros per square metre.

Fall in sales and purchases in Spain in 2023

The real estate market was marked in 2022 by inflation, rising interest rates and tighter financing conditions. This has been reflected in a slowdown in transactions between October and December, as Solvia recalls in its report.

The number of residential property sales and purchases reached 150,141 transactions in the last quarter of the year. This figure represents an increase of 4.3% compared to the same period last year, and, at the same time, a fall of almost 11% compared to the previous three months.

Pre-owned housing transactions grew by 7.7% year-on-year at the end of the year, and accounted for 83% of total sales and purchases. Meanwhile, new-build sales fell by 9.4% and accounted for nearly 17% of total transactions.

Compared with the third quarter of 2022, sales of used housing contracted by 10.8% and those of new housing by 9.6%.

By autonomous communities, Andalusia, Catalonia and the Community of Valencia led the transactions, with more than 20,000 sales each, followed by the Community of Madrid. By province, the negative trend prevailed in almost the entire country, with a double-digit fall in the number of transactions. The sharpest fall was in Zaragoza, with a drop of 24.9%.

Solvia estimates that the number of sale and purchase transactions in 2023 will be close to 600,000. In the case of new building permits, Solvia highlights that figures "not seen since 2009" were reached, with a total of 108,895 new licences in 2022.

The fourth quarter of 2022 closed with 30,608 homes approved, a figure 3.8% higher than the same period in 2021 and 18.1% higher than the previous three months.

By province, Barcelona, Madrid, Malaga, Valencia, Seville and Alicante accounted for 48% of visas in Spain. Madrid and Barcelona accounted for around 31% of construction permits.

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Rent on the rise in Spain

Rental prices closed 2022 at 11.5 euros/m2, an increase of 8.5% compared to the same period last year and 1.8% compared to the previous quarter.

Solvia's outlook is that rental prices will continue to rise throughout this year due to the increase in demand, much of which has been bounced back from purchases. The real estate services company also believes that the 2% cap on rents throughout 2023 will also make some landlords reluctant to give up their available homes to rent.

Experts say the lack of supply will result in rents rising by 15-20%, with markets tightening in the coming months.

The highest rent in 2022 was in Barcelona, Madrid and Guipúzcoa, with the price per square metre at 16.8 euros, 15 euros and 14.9 euros, respectively.

Ferrer-Bonsoms points out that this interest in renting will continue to grow in the future, "either because of the difficulty of accessing property or because the new demographic and social realities are creating a new scenario where renting is no longer just an obligation determined by circumstances, but a life choice".

"It is essential to commit to a structural housing plan with a long-term vision that takes into account renting as one of its priorities", he points out.

Solvia also perceives in its report that housing prices in Madrid are beginning to approach those of Barcelona, two of the cities with the most expensive m2 in Spain, only surpassed by the 4,074 euros in San Sebastian.

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