If you are planning to sell your flat in the short term, we advise you not to delay too long. The real estate market is still performing favorably, but things are about to change.
What is the future of the Spanish property market? What is the trend in house prices for 2023? How will house sales in Spain evolve this year? Numerous specialists claim that the market is entering a change of cycle and we could not agree more.
Our mission, however, is that you too will be able to understand the ins and outs of the market in order to make intelligent decisions about selling your home. On this page, we break down the key indicators and make some cautious predictions about home sales and house prices in 2023. Take note!
A bit of context on the property market
You will no doubt recall that two years ago we were confined by the threat of covid-19. Back then, our spending was reduced to the essentials: rent, food, basic utilities, and some entertainment, such as books or streaming TV. The pandemic left a bitter taste, but it allowed many of us to save more than usual. This accumulation of savings led to many families having the money they needed to take out a mortgage. Moreover, at the time, interest rates on loans were very low (the Euribor – the index that sets the price of most mortgages – was in negative figures). In this line of events, a kind of house-buying euphoria was unleashed and what many specialists call ‘the real estate boom’ began. In 2022, we broke all-time records in both price and number of sales and sales and reached, in general, figures not seen since 2008.
Energy crisis and inflation
But as we entered the ‘new normal’, something unforeseen happened: Russia invaded Ukraine and, in addition to the serious humanitarian consequences, a global energy crisis was unleashed. Rising energy prices, coupled with the high demand for products and services that we experienced after the end of confinement, ended up pushing up the cost of living: inflation exceeded 10% in August 2022 and began to reduce households’ real wages and their ability to save.
Interest rates and higher borrowing costs
Now, the story gets a bit more technical, but we’ll make it easy for you. Central banks have a tool at their disposal to contain inflation: interest rates, which define the price of money. As interest rates rise, interest rates on current loans (such as personal loans or mortgages) also rise. With more expensive loans, ordinary people will think twice about whether or not to take them out. Many of us, in fact, will decide not to do so.
This is how central banks manage to reduce the overall demand for goods and services (less lending = less consumption) and cool down the economy so that prices do not continue to soar. The European Central Bank raised interest rates four times in 2022, from 0% to 2.5%.
Influence on the real estate market
Believe it or not, all this determines the evolution of house prices and the number of sales and purchases, mainly because it leads to higher mortgage costs.
Read on and we will give you some details. Always remember that information is power and the better you understand the market situation, the smarter your decisions will be when selling your flat.
Sale and purchase of homes 2022-2023
The point is this. The savings accumulated during the pandemic and low-interest rates led to a boom in property sales that is still continuing. If you read the headlines in the press, you will have seen some of these statements: “Notaries put the number of home sales in Spain at almost half a million until August”, “Home sales and mortgages have risen for 18 months”, “The sale and purchase of used homes takes the number of transactions to its highest level since 2008”.
All this is true, of course, but things are beginning to change as a result of rising interest rates and the consequent rise in mortgage rates, which reduces the demand for housing. This, for example, is a headline published in December: “Notaries detect a 5% drop in house purchases in October”. And what are the forecasts for 2023?
Future of the real estate market: forecasts number of sales and purchases 2023
HelpMyCash specialists believe that sales will fall in 2023 and the rest of the real estate market experts agree with us. There is no consensus on the exact figure, but we show you the most important ones so that you can draw your own conclusions:
selling with a real estate agency, with a proptech or between individuals.
Atlas Real Estate Analytics. The consultancy firm forecasts a 15.4% drop in the number of sales by 2023.
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Redpiso Real Estate. The real estate franchise network Redpiso estimates that the contraction in the number of transactions will be between 20% and 30% during 2023.
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The University of Barcelona. The UB, in collaboration with Forcadell, says that if the ECB interest rate reaches or exceeds 3%, sales will fall by around 15%.
Back to index
House prices 2022-2023
The price of housing increased by 5% in 2022, according to Idealista. To understand this increase, we must take three things into account:
Inflation. If there is inflation, all prices rise, including that of housing.
Law of supply and demand. If the demand for housing is higher than the supply, prices go up. Remember that after the pandemic there was euphoria to buy property (demand increased).
Ukraine war. We have talked before about the increase in energy costs, but the war in Ukraine also led to an increase in construction costs. As a result, fewer homes were built in 2022 than usual (supply was reduced).
If you follow the history we have reviewed so far, it seems that rising interest rates and higher mortgage rates will mean that fewer households will be able to buy a home (demand will fall) and inflation will gradually be contained (prices of goods and services will fall). This is why house prices are expected to fall in 2023, but not that much: the lack of new construction will cushion the imbalance between supply and demand.
Future of the real estate market: house price forecasts 2023
There is also no consensus on how much prices will fall (or rise), but here is some data to give you an overview:
Atlas Real Estate Analytics. The consultancy forecasts a 0.9% fall in house prices by 2023.
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Bankinter. The Bankinter Analysis Department forecasts a fall of 3% for 2023 and 2% for 2024.
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BBVA. The real estate observatory of BBVA Research forecasts a 2% increase in house prices for 2023.
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ING. ING bank forecasts a fall in real terms of 3.4% for 2023.
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