PART 2: SPANISH HOUSING MARKET REPORT Q1-2024: 16,6% MORE HOMES SOLD | PRICES ARE ON THE RISE

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12.     Mortgages

In Spain a total of 151.476 (Q4-2023 129.875) properties were sold in the first 3 months of 2024 and 108.910  (Q4-2024: 89.917) were financed with a mortgage, that is 71,9% (Q4-2024: 69.2%).

The absolute amount of mortgages granted was 21,1% higher than in the previous quarter.

In Spain the average mortgage granted is 143.498,- euros (previous quarter: 143.706,- euros). Of all new mortgages granted 56.27% opted for a fixed interest rate.

The average fixed interest rate in the first quarter of 2024 was 3,66%  (previous quarter 3,68%).  Interesting fact: the lowest historic average interest rates were reached in 2022 with only 2,24%.

The average repayment term is 24,08 years with an average monthly instalment of 734,80 euros.

Mortgage and monthly income

On average mortgage payments require 33,2% of the monthly income (previous quarter 33,4%), with exceptional high efforts of 62,6% of the monthly income on the Balearic Islands

(previous quarter 53,3%) and 40,3% in Madrid (previous quarter 40%).

13.    Trend: Mortages more attractive?

The percentage of property investors in Spain that pay the purchase price in full without the need of financing is still considerable. Almost 30% of all properties sold are paid in cash, however this quarter again a rise in mortgages was noted. The trend may be changing as 71,9% of all homes sold was financed with a mortgage (69.2% in the previous quarter).

Although we cannot be completely sure, there seems to be a relation between the higher amount of properties sold and the rise in mortgages.

In percentages in the first quarter of 2024 21,4% more mortgages were signed and 16,6% more homes were sold.

In absolute terms this translates into 18.993 more homes sold and 21.601 more mortgages signed in the first quarter.

More additional mortgages than additional home sales were noted.

In Comunidad Valenciana 11.279 homes were financed with a mortgage in the first quarter of 2024. That is 44.9% of all homes sold.

In Murcia 2.736 mortgages were granted for the purchase of a home. That is 46.4% of all homes sold.

Both Costa Blanca and Costa Calida again show that more homes are paid cash than the national average.

14.     The Spanish Economy

Inflation:

The Spanish economy is performing well, even in the face of slowly decreasing interest rates, at a slower pace than marketwide expected, the inflation in Spain was in January with 3,4% slightly above the European average of 2,8%.

Employment:

In the first 3 months of 2024 0,54% more jobs were created than in the last quarter of 2023 according to the Spanish National Statistics Institute (INE). New job creation for 2024 is expected to be 3,5%. In 2023 the number of jobs increased with 3,8% (corresponding to 783.000 new jobs).

Company Formations:

In the first three months of 2024 32.788 new companies were created. An increase of 3,3% compared to the first quarter of 2023.

In the last 12 months 110.039 companies were created. 6,7% more than in the 12 months before.

Since the second quarter of 2021 the number of company creations has been above 100.000 per year.

As a side note, when we look at March 2024 alone, 10.683 new companies were created, which is 11,6% less than in march 2023. It is too early to identify a trend but it may be a signal.

In the first quarter of 2024 in the Comunidad Valenciana 4.140 new companies were created, in Murcia 745, Balearic Islands 1.211 and Andalucia 5.375.

The vast majority of new business are created as Limited Liability Companies.     

Insolvency proceedings Q1

The number of limited liability companies in serious financial difficulties that filed for insolvency proceedings in Spain in the first quarter of 2024 was 1.117, a rise of 9.3% compared to the same quarter of 2023.

15.    Note on the Housing Market: Is a Crisis coming?

The housing market is booming in many countries in Europe and elsewhere.

In May, The Guardian Weekly published an article on Europe’s housing crisis. The article mentions that between 2010 and 2022, house prices in the 27 member states rose by an average of 47%, and in Ireland by as much as 84%, while Estonia saw a rise of 192%. Only in Italy and Cyprus prices decreased.

The main reason is the shortage of affordable housing, which has already sparked protests in Lisbon, Amsterdam, Prague and, outside the EU, London.

According to Eurostat, rents rose by an average of 18% in the 27 member states over the same 12-year period. More than 20% of households spent today more than 40% of their income on renting, according to Eurostat.

Anyone living in Spain who can afford to purchase their first property is expected to do so within a year. Mortgage interest rates are expected to fall in the next 6 months, which will make more funds available to the lenders. This also seems so to be supported by the increase in national demand this first quarter.

Gonzalo Bernardos, a well-known Spanish economist and professor of economics at the University of Barcelona, who appears several times a week on national television in the economic talk show ‘La Sexta Explica’, predicts that property prices in Spain will increase by an average of 7% in 2024 and by a further 10% in 2025.

Among the reasons Professor Bernardos cites are national demand from current renters trying to buy their first home, low interest rates and the continued arrival of wealthy foreigners who simply love Spain and can now work remotely from Spain. 

The shortage of affordable housing and rising property prices is likely to cause serious problems in Spain too in the next years for young national professionals who want to buy their first home but also for, the oh-so-needed-workers in all levels of society including many service providers and the tourist industry who need to rent affordable housing.

16.    Market Outlook

As a team we have a strong connection with the real estate market, we have been in the business since 2013 and speak with buyers and sellers literally every day of the week. Our aim is to stay one step ahead of the game. We love to deliver! This we do through our extensive network where we deal directly with the best property developers, top quality construction companies, international investment funds, Spanish banks and real estate portfolio managers in Spain and abroad.

Our vision in terms of sale on the property market for the medium long term is unchanged for 2024 compared to our previous outlook in Q4-2023.

The number of properties sold so far this year in Spain is considerable and the creation of new businesses is still on the rise. The fact that many more properties than the national average on Costa Blanca and Costa Cálida are paid for in cash, without mortgage financing, is a strong sign of a solid property market that investors are confident to invest in.

On the other hand, the change in the mortgages that seems to be related to the rise in homes sold may be an indicator that property buyers who have been waiting for mortgage conditions to improve are now also looking at the already crowded market place.

An improved lending capacity for home buyers can have a considerable impact on the market. This, combined with a shortage of quality homes will likely lead to a further rise in housing prices.

All of these indicators confirm a solid sentiment with a strong indicator of the attractiveness and economic strength of Spain in general and more specifically Costa Blanca and Costa Cálida.

17.        A 10-year Outlook on the Spanish Property Market: 2024-2034

Based on the available economic data, market trends we spot and international attention for Spain we believe that the property market in Spain´s most sought after areas will grow significantly in terms of demand and price in the next 10 years. The supply is unlikely to get up to speed with demand and this is expected to keep price trends to be upwards on average year-on-year with possibly quarterly contractions.

In the next 10 years we expect property prices to double in the markets with high demand. Being these high-demand markets in Spain: Costa Blanca, Valencia City, City of Madrid and Andalusia.

On the Balearic Islands we expect a strong price increase, perhaps as much as 60%, but not as high as in the other areas. How the property market in Catalunya and the city of Barcelona will develop will largely depend on the political situation in the region in the years to come.

At nardia real estate agency we are confident for the long term future and look forward to help you as our client for many years to come!

The information used in this report is freely available on the website of the Spanish Property Registry, National Institute for Statistics (INE), the Spanish Company Registry and EuroStat.

This Housing Market Report for the Spanish Property Market for the First Quarter of 2024 has been written by Tom Bruijnzeel. He is the author of this informative Market Report about the Spanish Real Estate Market including the Note on the Housing Market, the Market Outlook and the 10-year-outlook on the Spanish Property Market 2024-2034 plus other articles and reports on our website. Tom has a master degree in Law from the University of Rotterdam (the Netherlands), holds a bachelor degree in Business and Economics and is fluent in Spanish, French, English and Dutch with full business proficiency in German. In 2013 he started nardia real estate agency in Spain. The website www.nardia.es is available to all who are thinking of investing in a property in Spain or already own a property and have questions about property tax in Spain, the correct registration of a property in Spain or the taxes due when selling a house in Spain.

If you want to connect via Linkedin:  linkedin.com/in/tombruijnzeel