The Spanish housing market has changed significantly over the last 20 years. The economic crisis of 2008, the corona pandemic and the war in Ukraine have all left their mark. What you paid in 2005 for a home in Spain is very different to whay you would pay now.
According to the Spanish Constitution, all Spaniards have the right to “decent and appropriate housing”. However, current house prices and high costs of gas, water and electric make it very difficult to access housing. Thus, it has now developed into a luxury good.
Buying a house turns out to be a luxury in Spain
The housing market prices have risen considerably in recent years. Furthermore, this increase is not proportional to the increase in the average wage. Buying a house is therefore a lot more difficult now than it used to be. The real estate portal Fotocasa recently analysed the development of house prices from 2005 to 2023.
This is how the Spanish housing market has evolved since 2005
2005 to 2008 was a period of economic boom in Spain. Until the economic crisis hit, the average price per square metre of a house was around €2,399.50. For example, a house of 80 m2 cost about €191,650.
In 2008, the collapse of the fourth largest bank in the US, the Lehman Brothers, led to a global economic crisis. Unemployment rose, the housing bubble burst and mortgage rates rose. Several banks had to be rescued from bankruptcy by the government.
In Spain, this crisis lasted almost ten years. The average price per m2 for a house fell in 2016 to €1,623.50. In other words; a house of 80 m2 that cost €191,650 a few years before fell in 2016 to an average of €129,880. That year, the Euribor rate also fell below 0%, which influenced the fall in house prices. This trend was broken in 2022 when interest rates rose and with it house prices.
Corona pandemic and war in Ukraine affect housing market in Spain
However, with the arrival of the corona pandemic, the average house price has fallen slightly again, according to data from the real estate portal. In 2019, the average house price per m2 was €1,875.80 and fell to €1,840.90 in 2020. This price decline stopped in 2021 when these average prices rose again to an average of €1,873.60 per m2.
Finally, the Russian invasion of Ukraine has resulted in higher energy prices. The ability of Spaniards to save decreased significantly because wage increases did not keep up with rising inflation. According to the latest figures from the INE, the average gross annual salary of Spaniards increased by 11.11% from €1,878.10 to €2,086.80 from 2016 to 2021. According to the Fotocasa index, house prices per m2 rose by no less than 15.41%
Due to the rise in the ECB interest rate, inflation and the rise in the Euribor, the difference between wages and housing costs has widened even further. For example, the average house price per m2 increased by 10.04% from January 2021 to January 2023, from €1,873.64 to €2,061.73.
