EDITION: SPAIN, 2024
EXECUTIVE SUMMARY
2024 has been a year of continued normalization and resilience in the Spanish residential real estate market.
Home sales in 2024 are projected to reach approximately 710,000 units, representing an 11% increase from 2023 and marking the second-highest level Spain has seen in more than a decade. This translates to a 5% average annual increase in sales over the last five years when compared to pre-pandemic levels.
The average cost of purchasing a home in Spain increased by about 6% over the last year, with national prices now approximately 10% below their peak in early 2008. In large cities and coastal areas, both purchase and rental prices are increasing at accelerated rates, with rental prices often outpacing purchase prices. This trend could be partially driven by higher foreign demand – nearly one in five homes sold in Spain are purchased by foreigners – and the shortage of housing supply in these high-demand areas.
Looking ahead to 2025, we expect housing demand to remain stable with potential for moderate increases. Projected interest rate cuts, demographic trends favoring immigration, and continued foreign investment are likely to support demand, whereas affordability constraints for local buyers and potential global economic uncertainties could pose challenges. Prices are also likely to continue increasing given Spain’s strong economic environment, the current housing supply shortage, and growing foreign demand.
NOTES ON THIS REPORT
All housing data reflects residential free-market housing in Spain.
Figures reflect the most current available data, generally through Q2 2024. Any exceptions are noted throughout the report.
Data sources are noted throughout and include:
• Eurosystem Staff Macroeconomic Projections for the Euro Area
• Bank of Spain Macroeconomic Projections for the Spanish Economy
• U.S. Federal Reserve Board Summary of Economic Projections
• Instituto Nacional de Estadística (referred to here as the Spanish National Statistics Institute)
• Ministerio de Transportes, Movilidad y Agenda Urbana (referred to here as the Spanish Ministry of Transport, Mobility and Urban Agenda)
• Idealista
• Spanish Notaries Office
La información presentada en este documento es de elaboración propia y sólo tiene fines informativos. La Sociedad rechaza expresamente toda responsabilidad por errores u omisiones de los datos presentados.
ECONOMIC BACKGROUND
2024 Economic Performance
Spain has experienced a remarkable economic recovery in 2024, with real GDP growth revised upwards to 2.5% for the year, surpassing the 2.4% growth observed in 2023. This robust performance positions Spain ahead of its Eurozone peers, which are expected to see average growth of 0.7% in 2024.
Strong performance in the export and tourism sectors, increased productivity, and improvement in the Spanish job market are the key factors explaining Spain's economic resilience in 2024, and as such provide fundamental background for understanding the state of the Spanish real estate market.
1. Export Strength: The export sector, particularly in services, has been a primary driver of growth. Export competitiveness has improved, with service export prices increasing less than those of competitor countries. Since the beginning of the pandemic, non-tourism service exports have become nearly 15% cheaper in relative terms compared to imports.
2. Tourism Recovery: The tourism sector, which accounts for 11.4% of Spain's economic production, has shown strong performance. The depreciation of the euro against the dollar in recent years and other emerging market currencies has helped diversify the countries of origin for tourists, partially offsetting the stagnation in the European economy.
3. Labor Market Improvements: The potential for job creation has increased due to immigration and higher participation rates. In 2023, the active population grew by 2.1% annually, with 71% of new employment corresponding to foreign-born individuals. The unemployment rate is expected to decrease from 12.2% in 2023 to 11.4% in 2024 and 10.8% in 2025.
4. Productivity Gains: Spain’s productivity per hour worked has grown by 3.2% cumulatively over the past four years, compared to 0.9% in the Eurozone. This increase in productivity is primarily due to increased productive efficiency within sectors rather than a restructuring of employment towards more efficient activities.
ECONOMIC BACKGROUND
Future Outlook
Key economic indicators to watch:
1. Inflation: In 2024, Spain has seen that inflation has moderated but remains a concern. The average inflation rate is projected to be 3.3% in 2024, similar to the 3,1% projected in the US, but above of the 2,4% for the Eurozone area.
2. Interest Rates: The European Central Bank and the Federal Reserve have been transitioning towards a less restrictive monetary policy, with interest rate cuts initiated during 2024 and further reductions expected in December. The potential consequences of lower interest rates for the Spanish real estate market are complex and could be the subject of an entirely separate report. In any case, we consider that this may contribute to an expansion of the demand.
3. Public Deficit: Data concerning Spain’s public deficit are fairly positive. The deficit closed at 3.7% of GDP in 2023, lower than anticipated, and is expected to fall below the 3% threshold to 2.9% of GDP by the end of 2024 without requiring additional measures of economic intervention. The debt-to-GDP ratio is projected to decrease from 107.7% in 2023 to 104.2% in 2024 and 102.1% in 2025, continuing its downward trend.
Despite these positive developments, the Spanish economy still faces several challenges:
1. International Political Uncertainty: The ongoing conflict in the Middle East could result in an increase in fuel prices, which would be especially damaging to the Spanish export and tourism sectors.
2. Housing Market: BBVA, one of the major banks in Spain, projects in a recent research report that the housing sector still needs to add 170.000 new homes annually through 2030 in order to close the current gap in housing supply.
3. Investment Lag: Investment in transport equipment and housing remains approximately 20% and 10% below 2019 levels, respectively, potentially affecting long-term productivity and competitiveness.
4. Productivity Gap: Despite improvements, GDP per employed person remains a concern in Spain, as it is 1.5% below re-COVID (Q4 2019) levels and remains nearly 20% lower than the Eurozone average.
Overall, Spain's economy shows resilience and growth in 2024, setting a favorable background for continued growth in the Spanish real estate market. Still, careful management of ongoing challenges will be crucial to maintain this positive trajectory in the coming years.
DEMAND
National
Sales
COVID substantially impacted residential property sales levels in Spain in recent years. 2020 sales dropped significantly with the onset of the pandemic, resulting in pent-up demand that, when released, caused higher than normal sales levels in 2021 and 2022. 2023 sales represented a return to more standard market conditions in the absence of the pandemic.
Based on year-to-date data from the Spanish National Institute of Statistics, we estimate that 2024 home sales will reach approximately 710,000 by the end of the year, equivalent to an 11% increase in sales from 2023 (Figure D1). This is equivalent to 5% average annual increases in sales over the last five years, comparing to the latest pre-pandemic data in 2019.
The falling interest rate environment has made financing more accessible and more appealing, and the rate of homes purchased with a mortgage has increased accordingly. 59.8% of homes purchased in April 2024, the latest data available from the Spanish National Institute of Statistics, had a mortgage. This represents more than a five-percentage point increase from the same month in the prior year, in which 54.5% of homes were purchased with a mortgage.
Figure D1: Spain Home Sales
DEMAND
Sales by Province
Six provinces account for roughly half of Spain’s total housing sales (Figure D2): Madrid (12%), Barcelona (10%), Alicante (8%), Málaga (5%), Valencia (6%), and Murcia (4%).
Of these, sales in Madrid and Barcelona over the last year have been roughly flat to pre-pandemic levels. Compared to the latest prepandemic period (Q2 2019), sales have increased at a rate equivalent to 2-3% annually on average in Málaga and Valencia, and 5-6% in Alicante and Murcia (Figure D3).
Figure D2: Spain Home Sales by Province January to September 2023
Figure D3: Spain Home Sales by Province and average annual increase since the latest pre-pandemic period
DEMAND
Foreign Market Share
As of Q2 2024, 19% of homes sold in Spain are bought by foreigners, up from about 17% five years ago. Foreign market share varies significantly by region; for example, Málaga’s foreign market share of 39% is roughly double the national average whereas Madrid’s is roughly half at only 11%. All of the six provinces noted above have seen increases in foreign market share over the last five years, with Málaga seeing the biggest increase at +6.1 percentage points (Figure D4).
D4: Foreign Market Share, Q2 2024 and percentage point (pp) change over the last five years
The UK, Morocco, Germany, France, and Italy are the top five nationalities of foreign buyers in Spain (Figure D5). Together these account for just over a third of foreign demand. However, apart from Morocco, where most purchasers are already Spanish residents, the market share of each has been steadily decreasing over the last five years. Foreign market share continues to shift outside of the Eurozone, with noticeably high sales growth in 2023 (the most recent year of data available from the Spanish Notaries Office, in the U.S. (+8%), China (+8%), Colombia (+10%), Ukraine (+23%), and Russia (+28%); no other country saw increases of more than 5%.
D5: Foreign Market Share by Nationality for the top five nationalities and the U.S.
Figure
Figure
DEMAND
Future Outlook
We expect housing demand to remain stable with potential for moderate increases in 2025.
Factors that could put upward pressure on demand in the coming year include:
1. Interest Rates: If interest rates continue to decrease as projected by the European Central Bank, that would make mortgages more accessible, which could increase demand.
2. Demographic Trends: The growth in the active working population, partly due to immigration, will likely increase demand in urban centers and areas with strong job markets. For instance, Moroccans with Spanish residency were the second largest group of foreign buyers in Spain in 2023. In addition, flexible and remote work arrangements continue to influence housing preferences, contributing to increased demand for home properties and office spaces in areas offering a higher quality of life. The city of Málaga, Spain is a prime example here.
3. Foreign Investment: Nearly one in five homes sold in Spain are purchased by foreigners in 2024. With demand apparently shifting outside the Eurozone, we expect that number to continue to increase.
Conversely, affordability constraints and the potential for upward price pressure resulting from current ongoing political conflicts could put downward pressure on demand.
1. Affordability Constraints: Affordability remains a critical factor, especially among Spanish potential buyers, given rising inflation and wage stagnation. First-time Spanish homebuyers might find it more challenging to enter the market unless wages keep pace with housing costs. This should, however, have a less substantial impact on Millennials, who face less economic constraints than Gen Z in the current economy and still account for the largest group of first-time homebuyers.
2. International political context: The current ongoing conflicts in eastern Europe and the Middle East may cause trade tensions, supply chain issues, or energy price volatility, impacting the cost of construction materials and imports and therefore housing prices and potentially demand.
SUPPLY
Accumulated Stock & Vacancy Rates
In the years following the 2008 crisis, new housing production slowed considerably in Spain as the market worked to absorb the housing stock that had accumulated during the construction boom of 1997 to 2007. Accumulated stock levels have come down considerably since that time, representing about 1.7% of the housing market according to the most recent available data (Figure S1), and many of these homes have become obsolete or are in low demand areas.1 That combined with population growth has caused production to pick back up to some extent, but today Spain is experiencing a shortage in housing supply relative to demand in many areas.
This is especially evident in large cities and along the coast. The Spanish National Institute of Statistics periodically estimates vacant housing rates based on electricity usage, and the most recent available data shows rates of less than half the 14% national average in Málaga, Madrid, and Murcia. Vacancy rates in Barcelona, Valencia, and Alicante are also less than 10% (Figure S2).
1Based on research by CaixaBank
Figure S1: Accumulated Stock of New Unsold Homes, 2023
Figure S2: Estimated Vacancy Rates
SUPPLY
Time on the Market
Data on the amount of time homes stay on the market also suggests lower supply in these areas. According to a study from Idealista, one of the largest real estate platforms in Spain, 36% of homes come off the market within one month at a national level. The market appears to move the most quickly in Madrid and Barcelona, with approximately 45% of homes coming off the platform within one month (Figure S3).
August 2024
Figure S3: Time on the Market
PRICES
National Prices
Recorded prices per square meter in Spain vary depending on the source but have generally increased by around 2-4% on average each year since 2019, with a price dip in 2020 coinciding with the arrival of COVID and followed by subsequent price increases (Figures P1 and P2). Sales prices recorded by the Spanish Notaries Office show an average annual increase of 3.8%, whereas valuation prices recorded by the Spanish Ministry of Transport, Mobility and Urban Agenda and asking prices recorded by Idealista show average annual increases of 3.0% and 4.6%, respectively.
Figure P1: Spain 2nd Quarter House Prices
Prices Per Square Meter
Figure P2: 2nd Quarter Year Over Year Price Changes
PRICES
Prices by Municipality
The evolution of prices in key municipalities of Spain since 2008 looks similar to that of prices nationally, with the largest cities of Barcelona and Madrid experiencing more dramatic price decreases around 2013 to 2015 but largely following the same pattern as other key municipalities (Figure P3). The most recent year over year data shows prices increasing by 5.7% nationally, with Málaga in particular exceeding that figure significantly (Figure P4).
Figure P4: Valuation Price Changes in Key Municipalities
Left Bar: Average year over year increase over the last five years (Q2 2019 to Q2 2024)
Right Bar: Most recent year over year increase (Q2 2023 to Q2 2024)
Figure P3: Valuation Prices for Key Municipalities Prices Per Square Meter
PRICES
Prices by Municipality
In many cases, recent increases were higher in municipalities with prices farther below their 2008 peak (Figure P5). For example, 10.5% increases in Valencia and Alicante come in the context of prices that are still 15-16% below their peak, and prices in Murcia increased by nearly 9% but remain 26% below peak. Prices in Málaga and Barcelona have fully recovered to 2008 peak levels.
Figure P5: Valuation Price Variation from Peak Based on Q2 2024 prices per square meter
PRICES
Rental Prices
Rental prices have also increased significantly year over year in many of these municipalities, notably by about 20% or more in Málaga, Valencia, and Alicante (Figure P6). Rental price increases appear to be outpacing purchase price increases in many areas (Figure P7), which may reflect higher demand for rental properties among foreigners.
Figure P6: Rental Prices per Square Meter Annual prices through 2024*
Figure P4: Rental and Purchase Prices
Left Bar: Purchase price change (Q2 2023 to Q2 2024) Right Bar: Rental price change (Q2 2023 to Q2 2024)
The key factors expected to impact housing prices in Spain largely point to continued price increases in 2025:
1. Foreign Investment: Nearly one in five homes sold in Spain are purchased by foreigners in 2024, and that number continues to increase. This trend is particularly pronounced in coastal areas and major cities, with some provinces seeing foreign market share around 40% or more. Continued investment by higher income foreign buyers will continue to push up Spanish housing prices.
2. Housing Supply Shortage: The persistent supply shortage referenced previously in this report is likely to continue putting upward pressure on housing prices, particularly in high-demand areas.
3. Sustainability and ESG: The growing importance of sustainable housing and adherence to Environmental, Social, and Governance (ESG) criteria will influence buyer preferences. Properties with energy-efficient features and environmentally conscious designs are likely to command higher premiums.
4. International political context: The current ongoing conflicts in eastern Europe and the Middle East may cause trade tensions, supply chain issues, or energy price volatility, impacting the cost of construction materials and imports and, in turn, housing prices.
