In 2023, the Community of Madrid experienced a year of falling sales and rising housing prices and rent. Forecasts also suggest that the trend will continue in the coming year.
According to the Madrid Association of Real Estate Companies (AMADEI), the market will continue to be marked by macroeconomic, political instability, and international conflicts.
In this scenario, AMADEI anticipates that "we will see a reduction in transactions in Madrid of between 8% and 15%, caused by continued high inflation, high interest rates and a convulsive global geopolitical situation due to international conflicts".
According to AMADEI, the Madrid market is one of the largest year-on-year drops in the number of transactions because, due to its size and client type, it is more vulnerable to the current economic and regulatory situation. However, "it will also recover much faster than many other markets in the country, as it is one of the regions that sets the tempos of the real estate sector at a national level," he adds.
He also expects new mortgage transactions to fall since "the decline in sales, interest rates and other economic factors will mean that buyers cannot afford to buy, as they will not be able to pay the mortgage payments they request and the banks will not grant them the necessary financing to carry out the transaction".
Rising prices and rents
AMADEI explains that property prices are too high in some areas of the Community of Madrid and should be reduced by at least 10%. However, the association expects them to continue to rise between 3% and 5% in 2024. This new price increase will make it very difficult for a significant part of the demand to be able to buy a home in Madrid's central districts, as well as in towns in the metropolitan area such as Mostoles, Alcala de Henares, Torrejon de Ardoz or Fuenlabrada.
"Banks have adopted a precautionary stance in the face of global economic and political uncertainty, so they are granting mortgages for 80% of the property value or even less, which are insufficient for most potential buyers. And the fact is that the purchasing power of the demand has dropped significantly in recent years if we relate the evolution of the average salary of citizens to the cost of living in the Community of Madrid," regrets the Madrid Real Estate Association.
Regarding rent, he also expects rental rates to rise in the face of increasing demand and an increasingly scarce supply of rental properties.
Besides the high Spanish and international interest in the region, due to labour, social and cultural factors, "those who cannot buy due to higher mortgages will rent, further reducing the available supply. Although we are a country of homeowners, young people do not have easy access to housing, and a closer relationship between the public and private sectors is needed to increase the affordable rental stock and solve this problem," says AMADEI.
According to the forecasts of the AMADEI, rental prices will grow by 8%–10% in 2024, and the trend will continue until a solution is found to the insecurity of small savers due to the entry into force of the Housing Law. "If rent goes up more than 10%, the population will not be able to pay the rent. Restricting prices in strained areas, limiting CPI rises, and the difficulties associated with evicting a defaulting tenant or a squatter mean that there will be no more supply and prices will rise," assures AMADEI's president.
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