And why is it the right moment to invest in a newly built home?
Real estate prices soar when the number of property transactions increases. However, the current real estate scenario in Spain appears to be deviating from this usual scenario. Because of the European Central Bank’s increase of interest rates, real estate transactions are slowing down, and buyers are patiently waiting for prices to drop. Except that prices are not showing any signs of decline.
According to the Spanish National Institute of Statistics (INE), housing prices have increased by 3.5% in the first half of 2023. While the ECB’s measures have prevented prices from skyrocketing as they did in 2022 (7.4% year-on-year increase), the relentless upward trend that began in 2014 seems unstoppable, with only a subtle slowdown since 2022.
Other European countries are experiencing the usual market reaction, with clear downward price trends. In Sweden, for instance, housing values have dropped by 12% year-on-year, accompanied by an 11% decrease in transactions. Germany also witnesses a 10% year-on-year adjustment in housing prices. And news coming from the UK seem to confirm a similar downward trend in home prices.
According to CBRE, the key to the limited impact of inflation and macroeconomic deterioration on prices lies in the supply-demand imbalance. Spain is currently constructing only half of the new homes that families need, creating twice as many new households as there are new homes available. This pronounced disparity between new and existing homes exacerbates the shortage of new housing.
When analysing data for new and existing homes, transactions for new properties remain stable, while existing home sales are declining. These latter sales significantly impact the total number of property transactions, which are expected to be 24% lower by the end of 2023. This forecast suggests a modest 1.1% increase in housing prices for the current year. In contrast, newly built homes are expected to see a 5.2% price increase, while existing properties are likely to experience only a marginal 0.6% increase.
The Spanish housing market is becoming increasingly polarised, with a highly competitive environment for new properties and more room for negotiation in the existing home market. Additionally, a growing trend of mortgage-free property acquisitions is not helping to lower prices. In June, only 56% of property sales involved mortgages, according to data from the General Council of Notaries. This trend is influenced by factors such as increased foreign property purchases and a rising interest in real estate investment for rental purposes.
Spain’s real estate market remains a dynamic field for international investors and buyers. It is a great moment to invest in a newly built property, stay tuned for updates!
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