Spain | Real Estate Watch. August 2024

Falling interest rates, the gradual recovery in the eurozone and a more positive demographic outlook are expected to boost residential demand, which in a context of relatively limited housing production will lead to house price growth in the current biennium.

Key points

• Key points:
• Growth in the European economy will continue to be led by consumption and will be helped by lower interest rates. In Spain, the recovery has intensified more than expected, raising the forecast for GDP growth in 2024 to 2.5%. In 2025, the economy will grow by 2.1%.
• Housing sales continue to grow and in the first five months of 2024 grew by 6.1%. Likewise, new building permits started the year up (14.8% YoY between Jan-May 24), although the level is relatively low. The mismatch between supply and demand continues to encourage price growth, and in 1Q24 prices rose by 4.3% YoY.
• Falling interest rates, a gradual recovery in the eurozone and a more positive demographic outlook are expected to lead to higher residential demand. Home sales could grow by 5.0% in 2024 and rise to almost 700,000 units in 2025.
• Residential construction is expected to start to pick up more strongly from 2024, when the signing of approvals would reach 120,000 units, and to continue in 2025 with new housing starts advancing by around 15%.
• The increased construction activity will not be enough to counteract the pressure of demand, which will lead prices to grow more intensely, by around 5% on average per year in both years.

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