Property prices in Spain show no signs of slowing down, and with high demand, low supply and a recent cut in interest rates, more potential buyers could soon be entering the market, further pushing prices upward. For many, these wouldn’t seem like the ideal time to buy property.
However, some experts argue that things are unlikely to improve so now is as good a time as any.
The average price of housing in Spain has now surpassed the high during Spain’s property bubble. Spain’s National Statistics Institute (INE) recently released the annual change in the Housing Price Index (IPV) for the first quarter of 2024. It increased by 2.1 percent to 6.3 percent overall.
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The annual rate for new housing rose 2.6 percent to 10.1 percent, and second-hand housing stood at 5.7 percent, with a rise of two percent compared to the previous quarter.
Described by many as a ‘housing crisis’, the property market in Spain has become increasingly inaccessible for many Spaniards. Whether it be record prices or long-term rising mortgage rates (more on that below) many are forced into the volatile and increasingly expensive rental market due to housing shortages.
In terms of prices, after a slight fall in the last quarter of 2023 when the year-on-year rate fell by 1.1 percent, the first three months of 2024 have dispelled any doubts and, in the words of La Sexta, showed that the market will “continue to impose its law, tipping the balance towards the path of exorbitant housing prices that had already begun to mark its path during 2023.”
With rising prices and demand combined with supply shortages, buying property in Spain has become available only to a “privileged group”, La Sexta argues.
According to Fotocasa, a property website in Spain, “fewer people are finding what they are looking for in the market because the scarce supply does not meet their expectations. In fact, despite the tightening of access to financing, the demand for purchase continues to surprise with strong and intense levels.”
However, earlier in June the European Central Bank (ECB) cut interest rates from 4 percent to 3.75 percent. The ECB cut will affect all areas of the property market, and experts believe it could drive demand even higher and thus raise prices further.
“We know that there are 19 percent of buyers who have stopped the process because they’ve been affected by the rise in interest rates, they will probably return to the market in search of a more attractive opportunity,” Fotocasa states. “We have also measured that 21 percent were willing to return to the market once rates come down, so in the next few months we could find around 30-35 percent more buyers looking to buy.”
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In short, the already high demand will likely shoot up in the next few months, which will in turn increase prices.
A good time to buy?
However, many experts argue that 2024 may actually be as good a time as any to buy property in Spain, exactly for the reasons many assume it might not be.
François Carrierre, CEO of Coldwell Banker Spain, told Idealista that “except during the 2008 crisis, it has always been a good time to buy a property” in Spain.
With regards to the interest rate cuts, Carrierre said that waiting for the impact of falling rates could actually cost you more in the long run: “At the moment there is a question of whether to buy now or wait for interest rates to fall, but if you wait it will probably end up costing more,” he reasoned.
Similarly to those experts who argue that prices are unlikely to fall anytime soon (and why that makes it a bad time to buy) Jorge Henriquez from RE/MAX Grupo Lanzagorta suggests that “the lack of stock and the ease in obtaining a mortgage with better conditions will not help prices to fall, quite the opposite,” and that now is a good a time as any.
Carles Sala, a spokesman for the API real estate agents of Catalonia, concluded that regardless of whether it is a good time to buy or not, “prices are not growing with the intensity they have done in recent years. Therefore, if we are watching or waiting for a drop in prices, we believe it is not going to happen, so although it is not the best time, there is nothing to indicate that next year will be any better in terms of prices.”
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I find it very difficult to believe that there is “high demand and low supply.” I monitor the property market in Spain closely and I am continually amazed by how long properties stay on the market. It seems to me that very few Spaniards are able to buy at the moment, which implies low demand, and that there is a huge glut of properties that are selling, implying high supply.