• Evolution of Housing Market in Spain

    February, 2024

The last few years have been marked in the real estate sector, as in all investment sectors, by the sharp rise in interest rates and inflation. As far as our sector is concerned, this was translated into a sharp rise in the Euribor, which has slowed down real estate investment.

These macroeconomic data has caused the prices of both the sale and rental of housing to soar. In the office market, we can see increases of c. 7% in the sale price of properties compared to the same period of the previous year. In the case of rents, the rise is significant but not as noticeable, 4% more in the year-on-year context.

Since inflation started at the beginning of 2021, the average offer price has risen by c. €300. The cities where the average selling price is highest are the Balearic Islands and Guipúzcoa. If we talk about rent prices, the average €/sq.m./month is around 11 €/sq.m./month, with Barcelona having the highest rental price per sq.m and Jaén and Ciudad Real the lowest.

This rise in prices is also driven by the lack of supply in the sector and the new housing law that stablished rent caps. If we compare both typologies, the supply in the rental market is about five times less than in the sales market. Compared to last year’s levels, this represents a drop of c. 4% and 1% respectively.

International investment continues to be of great importance, representing c. 12% of demand in both typologies (rental and purchase). Moreover, this demand has been increasing since 2020, reaching c.12% of total demand in 2022. Of the foreign demand, the German investor stands out, with c. 10% invested of the total foreign investment.

European residential yields increased by c. 100 basis points from mid-2022 to c. 4.5%. Unlike the commercial sectors, residential properties have shown greater resilience, with the impact on valuations mitigated by rental growth and connections to CPI without caps. Despite the expected resilience in the living sectors due to low supply, investors should remain cautious about potential impacts on cashflows from new rent regulations.