New-build housing prices in Spain will continue to rise in the first part of the year (4.1%), although at a slower rate than in previous quarters, to settle at an average of €2,925/m2, according to Sociedad de Tasación (ST)'s outlook for the residential market. For Consuelo Villanueva, Director of Institutions and Key Accounts at ST, house prices are nearing a turning point and "a slowdown in the growth of the average house is expected to become increasingly evident". This article takes a look at the 2024 challenges and market trends.
The latest residential market study by Sociedad de Tasación analyses the trends and challenges for 2024, a year that seems likely to be marked by the economic slowdown that was already expected in 2023, employment trends as well as inflation and, therefore, the European Central Bank's (ECB) decisions on interest rates.
Inflation trends will shape 2024. New pressures could generally limit the Spanish economy's growth due to weakened foreign demand, seen in the slowdown in exports and foreign house purchases.
For Consuelo Villanueva, Director of Institutions and Key Accounts at ST, "home purchases by foreigners account for around 15% of total transactions. Citizens from European countries with a higher incidence of inflation are not buying as much housing as they used to. But these classic nationalities (Germans or Brits) are being replaced by other nationalities, such as Colombians or Romanians".
Economic developments will condition the mortgage market. The Euribor has fallen for two consecutive months as a leading indicator that may point to a relaxation of the ECB's monetary policy, foreseeably starting in the second half of 2024. This expected drop in interest rates could lead to a possible change in the balance of fixed-rate and variable-rate mortgages, according to Leticia Sánchez, the company's strategic market analyst.
The real estate market continues to show resilience in terms of activity, even though home sales and purchases have been declining for ten months year-on-year, the report continues. The labour market closed 2023 with an upward trend regarding Social Security enrolment, and household purchasing power has recovered slightly. "Wages and inflation are growing at a similar rate, although the outlook for 2024 points to contained consumption, due to the loss of disposable income that has occurred during 2022 and 2023, and the slowdown in the savings rate during the last quarters,", the analyst specifies.
Based on INE data from Registrars, ST's forecasts speak of a fall in transactions of around 10% year-on-year in 2023, which will result in over 550,000 transactions, keeping figures unchanged since the end of the pandemic.
The Sociedad de Tasación report also highlights the heterogeneity of the market, with differences between autonomous communities and by housing type, new or used. "New build housing is still increasing at a higher rate than used housing (1% or less). This slowing of the level of increase is due, among other things, to the fact that sales times are being delayed," says the director of Institutions and Major Accounts, who rules out price reductions in the short term provided that the current demand for housing is maintained.
Shortage of new builds puts upward pressure on prices
Another of the highlights from Sociedad de Tasación's report is its analysis of the need for 800,000 new homes in Catalonia and the Community of Madrid over the next 15 years to accommodate the expected number of new households in these autonomous regions. In fact, according to population forecasts for the next three decades, half of the demand for housing will be concentrated in these two regions.
The current levels of new-build housing construction, which are between 80,000 and 100,000 approvals per year, are "insufficient", and since the 2008 crisis, there has been "an imbalance between supply and demand for new housing", said Villanueva.
The highest average price for new-build properties is in Barcelona city centre (€5,156/m2), and both Barcelona and Madrid (€4,385/m2) and San Sebastián (€4,283/m2) are above the €4,000/m2 mark.
Meanwhile, Malaga is, for the third consecutive year, the Spanish provincial capital where the price of new housing has grown the most over the last year (7.2%), ahead of major capitals such as Palma (6.8%), Madrid (6.3%) and Barcelona (4.9%).
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