Spain | Why are house prices not receding?

In recent months, the country’s real estate market has not been performing as one might expect, in the sense that house prices are not receding as sales decline.

Key points

• Key points:
• Indeed, housing sales have seen a decline as interest rates continue to rise (a process that began in mid-2022). While in the first half of 2022 almost 63,000 homes were sold per month, in the following ten months this figure fell to just over 57,000 units per month. In the first four months of 2023, we have seen a year-on-year decline of 13%.
• According to the Ministry of Transport, Mobility and Urban Agenda, the year-on-year change in the first quarter of 2023 was 3.1%, similar to that of the last quarter of 2022 and in line with the figure recorded in 2018, when sales grew at 9% annually.
• The last time that house sales fell at a similar pace (back in 2013), house prices also fell by 6%. However, according to the National Statistics Institute (INE), prices did not fall in the first quarter of 2023 (they were up 3.5% year-on-year, 2 pp less than in the previous quarter).
• There are various factors supporting prices at present, including the increased costs that investors must meet, which inevitably feeds through to prices. Demand is also relatively strong. Despite the contraction seen over the last few months, demand still remains at a similar level to 2019 and is expected to remain there over the next two years for various reasons.
• Another factor is the uncertainty surrounding the new Housing Law, which has slowed the development of new construction work and reduced the supply of rental properties, thus increasing the pressure on the supply of housing for sale. Last but not least, residential properties are in relatively short supply.

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