Despite a general economic slowdown in 2023, the Spanish real estate market continues to show resilience, mainly driven by strong domestic demand.
The Aura Residential Market Report analyses the evolution of real estate at the end of 2023 and launches its forecasts for this year. The demand for housing is supported by a combination of factors. This includes a surprisingly resilient labour market and a recovery in household incomes. This has led to an increase in net household creation. 285,000 new units were added in the last 12 months. That level is comparable to the period of 2008-2009.
Spain as a magnet for foreign investors and residents
Spain remains an attractive destination for foreigners. Not only for tourism but also as a place to live and invest. The country has welcomed a record number of foreign tourists in 2023. That is contributing to population growth not seen since the 2000s. This trend has led to record numbers of foreign real estate transactions in the past 24 months, despite a decline in demand in the second half of the year.
Aura points out that tourism is increasingly spreading throughout the year and is not just limited to the summer months. This is a consequence of the weather, and prices, but also of the sharp increase in energy costs in Northern European countries.
Immigration has also reached its peak this year, with more than 580,000 newcomers. A figure like this has not been seen since the 2000s. Since 2009, there has been a growth of 1.2% for the first time, thanks to foreigners coming to Spain to live and work.
Shortage of 2.1 million homes in 2037
However, the housing market remains under significant pressure due to declining supply and slow real estate development. The available housing supply on real estate portals has decreased since 2020. Moreover, the construction of new homes is lagging behind demand. This has led to a ‘chronic’ shortage. Since 2008, more households have been created than homes have been built. According to projections by the statistics agency INE, Spain could have a shortage of 1.2 million homes by 2037 at the current construction rate.
Accessibility to credit and its impact on the market
Accessibility to credit is another important factor influencing the real estate market. The cost of new bank loans and the average debt burden have risen in recent months. This has led to a deterioration of the affordability ratio. This has had a clear impact on mortgage demand, which has fallen by 30% year-on-year. It did contribute to a decrease in total mortgage debt.
Transactions and prices: a mixed picture
Despite these challenges, 2023 ended better than expected in terms of real estate transactions. The number of transactions nationally is above the 2019 figures. Although, significant decreases have been observed in Madrid and the Balearic Islands. However, house prices remain strong, with solid growth in the last quarter of the year, indicating continued resilience in the Spanish property market.
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