Spanish Residential Market Overview – Q3 2022
The residential sector’s rally continues, with prices growing at 4% annually as of Q3 2022, being the sixth quarter in a row in which prices move upwards, increasing the average €/ sq.m. in Spain to c.€1,500.
As prices increased, average rents followed the trend as well, reaching €11.2/ sq. m in September 2022, with provinces like Malaga, Girona and Valencia, experiencing the highest increases (+15% September 2022 vs. September 2021), and emphasising the growing preference in Spain for rental housing.
In terms of prime yields, the residential market has suffered its first upside correction during Q3 2022, being the first since several years ago. Said correction of 0.25%-0.50%, left Madrid’s and Barcelona’s prime yields between 3.25% and 3.75%, respectively. The adjustment occurs as financing costs raise as inflation is being dealt with. The result of the current situation, along with yield adjustments, will likely cause prices to decelerate in the coming months.
Despite forecasts, the accumulated investment volume in residential so far this year is already higher than FY2021, accounting for €2.23 billion, of which €470 million correspond to Q3 2022. Investment funds, insurance companies and developers, were the most active investors, representing 83% of the transacted volume. Moreover, the most common origins of investors were Germany, the Netherlands and the US.
To sum up, the residential market is still the most important sector of the living market, accounting for 50% of all investments. The largest deals this quarter include: i) the acquisition of two land plots, one in Madrid and the second one in Barcelona, by Kronos for €128 million to build c. 600 units; ii) the acquisitions made by CBRE IM to Culmia in Badalona for €100 million and in Barcelona for another €100 million, both of them currently under construction.