While house prices are plummeting across much of Europe, Spain’s property market is experiencing a noticeable surge.
According to Eurostat, property prices in Spain rose by 4.3% in the final quarter of 2023. Spanish property sales reached 586,913 last year, 24% higher than the 10-year average and the second-highest figure in over 15 years.
In contrast, residential property prices across the EU dropped by 0.3% in 2023, with the eurozone seeing a decline of 1.1%. Northern Europe has been hit especially hard, with Germany and Luxembourg seeing property prices fall by 8.4% and 9.1%, respectively. Denmark’s prices dropped by 5.6%, while the UK saw a smaller decline of 1.4%.
Despite challenges like high inflation, rising interest rates, and cost-of-living pressures, Spain’s housing market has remained robust, unlike many of its neighbours.
What’s driving this demand?
Spain’s population is growing, thanks largely to immigration. In 2022, net immigration reached 727,005 – the highest in a decade. Among the new arrivals are wealthy Northern European retirees seeking a sunny retirement, digital nomads from across the globe, and Middle Eastern buyers looking for luxury homes along the Mediterranean coast.
Additionally, affluent South Americans are purchasing properties in Madrid's exclusive Serrano district, viewing Spain as a safe place to invest their savings. Many of them are also drawn by the prospect of securing a second passport through Spain's Golden Visa scheme, though Prime Minister Pedro Sánchez has announced plans to phase it out – a process that may take some time, as evidenced by Portugal’s drawn-out termination of its own Golden Visa program.
The post-COVID era has brought an increase in foreign investment, with more people eager to work remotely near the Mediterranean. Barcelona, for instance, is now competing with New York as a destination for global relocators, yet it remains far more affordable than Paris.
Meanwhile, Spanish mortgage holders have avoided some of the financial strain faced by their British counterparts. Mortgage rates in Spain remain lower than in the aftermath of the financial crisis when they averaged around 5%. In contrast to Britain’s shorter mortgage terms of two to five years, fixed-rate mortgages in Spain often have terms ranging from 10 to 30 years. This has prevented many homeowners from having to remortgage at significantly higher rates, limiting forced sales and helping to keep the market stable.
At the same time, housing demand has increased while supply has struggled to keep pace. In 2023, Spain faced a shortfall of 325,000 homes, with the demand for housing exceeding the number of new builds. Developers attribute the lack of housing to bureaucracy, especially the challenges of obtaining permits from local authorities, as well as rising construction costs. This shortage of high-quality housing has further tightened the market.
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