June 22th, 2024 | 5:51

News

Buying homes in 2023: stagnant prices and lower demand in the Spanish real estate market

Miguel Castillo

March 31, 2023 | 10:02 a.m.

The financial sector anticipates a weakening in demand and a reduction in the number of real estate transactions in 2023, although a slump like in the 2008 financial crisis is not expected.

The Spanish real estate market could face a slowdown in 2023 due to the stagnation and possible fall in housing prices in the first half of the year. ING analysts forecast this scenario in their report Spanish Real Estate Market Outlook 2023. However, they assure that Spain will not experience a collapse like the one that occurred during the 2008 financial crisis.

This situation is due to the strong increase in interest rates and the tightening of credit conditions. Despite this, in 2022, 719.680 home sales were registered, the highest figure in 15 years. On the other hand, Bankinter predicts a cooling off in real estate activity, estimating that transactions will fall 13% in 2023 and 5% in 2024.

Price drop on the horizon

Although in 2022 the price of housing in Spain rose an average of 7,4%, according to data estimated by Eurostat, the monthly data from Tinsa indicate a weakening in the first two months of 2023. Analysts from CaixaBank Research predict that the house prices will remain practically stagnant throughout the year of 2023. This phenomenon is mainly due to the increase in interest rates that the ECB is carrying out to curb the increase in inflation.

Bankinter expects house prices to undergo an adjustment in the next two years, with a fall of around 3% in 2023 and 2% in 2024. The main factors that will drive these adjustments include the higher cost of mortgage financing, the decrease in the household savings rate and the loss of attractiveness of investment in rental housing.

For its part, ING shows greater optimism and, although it believes that prices will stagnate, it expects that the fall will be only 1% in the first half. He also points out that the House price growth will remain below inflation over the next three years, which will cause a significant decline in property prices in real terms.

The impact on housing demand

The weakening of housing demand in 2023 could have multiple causes. Among them, the increase in interest rates will make mortgage loans more expensive, which could discourage potential buyers. In addition, economic uncertainty and the impact of inflation on the purchasing power of citizens could reduce their ability to purchase a home.

More news