The bubble in the housing market seems to be slowly deflating. Where the price for a house in Spain rose by 10% in 2021, that percentage will be more than halved this year. Nevertheless, demand for housing remains high across Europe.
The turning point in the housing market seems to have really come. Although prices will continue to rise in the coming period, the boom in the market will decrease by 2023. In Spain, house prices will rise by 4.6% in 2022. Then, the rise in house prices will level off further to 4% in 2023; 3.5% in 2024 and 3.2% in 2025. These estimates were recently made by the US credit rating agency S&P Global Ratings.
Housing market cooling down due to two main factors
The cooling of house prices is explained by the fact that mortgage rates and inflation are rising and people simply have less money left and can´t borrow. In the second half of 2021, according to S&P Global Ratings, house prices in Spain had risen significantly along the Spanish coast but slightly more moderately in Madrid.
Spain housing market equal to the rest of Europe
The trend in the housing market in Spain is almost identical to eleven other European countries analysed by the agency. House prices in Europe will fall from an average growth of 10% in 2021 to around 5% in 2022 and 3% in 2023.
House prices in European countries will continue to grow slowly, demand will remain high, supply will remain limited and the sector will continue to feel the effects of the refugees from the war between Russia and Ukraine. Of the 5.5 million refugees, Spain has now taken in 124,000 (UNHCR figures as of June 2022).
Largest increase in house prices ever in 2021
Eurostat’s latest measurements confirm the ‘boom’ of house prices in the eurozone. In the first quarter of 2022, they rose by an average of 9.8% compared to Q1 2021. This is the highest increase ever since keeping the statistics in 2005. Spain is just below the European average at 8.5%. Also according to Eurostat, the flattening of house prices in Spain, as in the rest of Europe, has been clearly visible in recent months.