Sales Are Dropping But Property Prices Are Still Rising In Spain. Here’s Why

If you own a property in Spain or are thinking of investing in a property in Spain then, like us, you probably spend a lot of time looking at property prices. And if that’s the case then it’s likely you’ll have noticed an unusual trend. Property prices are still rising in Spain despite an overall fall in sales.

According to the Spanish House Prices Index which is published by the National Statistics Institute Spain saw a 4% rise in overall property prices in 2023.

Here’s what this means for home owners and house hunters living in Spain right now:

Property Prices Are Rising

As mentioned above, overall property prices in Spain raised by 4% in 2023. But actually this demonstrated a cooling of the market compared to 2022 rates. In 2022 property prices shot up by 7.4%. Despite this prices for both new build (7.5 percent) and second hand properties (3.6 percent) still increased year-on-year in 2023 and when prices rise we usually expect to see sales figures increase too. However right now that isn’t the case.

Why Are New Build Prices Increasing Faster Than Second Hand Properties?

The answer to this question is simple: supply and demand. People love new build properties and this is represented in their price but despite these supply is scarce in the new build construction market in Spain. Where demand is high and supply is low, property prices will always be driven higher.

This is further expanded on by director of research at Fotocasa Maria Matos, who expanded that:"The obstacles surrounding this type of construction have a long way to go, not only because of inflation, which affects the cost of materials, production and logistics, but also because of the low production levels of new construction.”

How Much Are Sales Falling?

Against a backdrop of rising property prices, particularly within the newly constructed property market, we are seeing a significant fall in sales overall in Spain. Property sales fell by 9.7% in 2023 compared to 2022.

But perhaps the biggest fall was in new mortgage applications which dropped by a whopping 17.8% in 2023 according to newly released INE data.

Interestingly, despite the overall fall in sales in percentage terms, 2023 was one of Spain's best years for property sales since 2007. In real figures the country saw 586,913 houses sold over the 12 month peoriod and 381,560 mortgage agreements signed. This represents the 3rd best year for the mortgage industry since 2011.

So What Does This Mean?

So what does this mean for homeowners and home buyers living in Spain? Well the Spanish economy has been relatively robust (certainly compared to its European neighbours) in controlling inflation but weakened spending power and price rises have still taken their toll.

The same expert quoted above has elaborated on this further stating that "The demand to buy housing continues to be very intense, despite the ten interest rate hikes and the consequent tightening of mortgages...With a strong intention to buy on the ground against the shortage of existing stock, which is becoming increasingly significant, there is an imbalance that pushes the price up."

House prices are rising and in some places more so than others. Based on the 4th quarter of 2023 the regions with the highest price increases are Andalusia (5.3 percent), Navarra (4.7 percent), the Canary Islands and Madrid (both 4.5 percent).

By contrast the lowest increases were found in Castilla-La Mancha (2.1 percent), Extremadura (2.2 percent) and Galicia (3.4 percent).

Are you thinking of moving to Spain? Looking to leave the USA and make an escape to the sun? Then why not get in touch with our local property experts, who are perfectly placed to help you buy the Spanish home of your dreams. We’re excited to help you make your next move your best move