The Rise in Spanish Housing Prices Slows while Sales Accumulate Six Months of Declines

Home sales and purchases in Spain have accumulated six months of declines and the rise in housing prices is beginning to show signs of moderation.

Home sales and purchases reached 54,063 transactions in May, which is 6.7% less than in the same month of 2022, according to the Real Estate Registry Statistics of the Association of Registrars. Home sales and purchases have fallen by nearly 4,000 operations: from 57,943 registrations in May 2022 to 54,063 a year later.

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Why do housing prices remain high?

For its part, the housing prices look set to remain high in the second half of the year despite the drop in the sale and purchase of homes and the fall in the signing of mortgages, according to Sociedad de Tasación. Last May, 32,043 housing mortgage operations were constituted compared to 42,311 in the same month of the previous year, a decrease of 24.3%, with 10,200 fewer operations.

As for housing prices, the differences between new and used housing remain. The former maintains greater upward pressure due to the lack of supply, while the latter has less due to negotiations between buyer and seller and an increase in sales times.

In the first half of the year, the price of new homes rose to 2,809 euros per square meter in June. This figure represents an annual growth of 6.4% and a monthly increase of 2.8%. According to the Sociedad de Tasación, “it reflects a slowdown in the price increase with respect to the December 2022 figure”.

Meanwhile, used housing is on average 1,000 euros below this level. In March it reached 1,801 euros per square meter, a year-on-year increase of 4.1%, and a half-yearly increase of 2.1%. As in the case of new housing, this figure shows less upward pressure.

To justify these price levels, the Valuation Society recalls that six times less is being built at the moment than fifteen years ago, despite the fact that the demand for housing is sustained.

According to the latest available data, the number of new construction permits stood at 108,985 at the end of 2022, a figure practically identical to that of the previous year (108,318), but a far cry from the 865,561 permits issued in 2006. This is recorded in the records of the Ministry of Transport, Mobility, and Urban Agenda (Mitma).

By territory, 16% of the new production is concentrated in the cities with the greatest economic activity. But they consider that it is not enough to respond to the population flows toward the big cities and the creation of new homes.

In sales and purchases, the statistics of the Registrars reflect that Madrid has a decline in May of 20.6% compared to the same month last year. And 30.9% fewer mortgages were signed than in the previous year. The average drop in home sales and purchases is 6.7% and the drop in mortgages is 24.3%.

The Valuation Society also stresses that financing continues to become more expensive, following the ECB rate hike, and considers that demand is adapting to this new scenario.

Currently, the home buyer responds to a solvent profile, which allocates a higher percentage of its savings to the payment of housing to the detriment of bank financing

“The decrease in real estate transactions would be determined by a part of the demand that would be postponing their purchase decisions for later and, by another segment of the population, whose accessibility would have been limited, either by the tightening of financial conditions or by the increase in the cost of financing,” they conclude.

According to the portal Idealista, the price of used housing in Spain in the second quarter of 2023 has risen by 2.4%, to 1,990 euros. In addition, prices have increased by 7.6% in the last 12 months.

The spokesman for Idealista, Francisco Iñareta, explained a few days ago that although it may seem “strange” that prices are still rising at a time when sales and purchases are falling, “the reduction in the number of transactions is directly related to the disappearance of the ‘stock’ and not so much to the uncertainty or the increase in the cost of financing”.

In this way, he was of the opinion that “it would not be surprising that, during the next few months, prices will continue to rise across the board and with special pressure in Madrid, the archipelagos, and the Mediterranean coast.”

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(Featured image by Tierra Mallorca via Unsplash)

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First published in EL INDEPENDIENTE, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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