House prices in Spain

What happened to house prices in Spain in 2024 and what can we expect in the year ahead ?

First, let’s consider how the residential property market performed last year. The significant increase in average house prices, reaching €2,164 per square metre, represented a 12.5% increase from the historical peak of 2007.

This growth was largely driven by the following factors:

Sustained Demand: Economic recovery and job stability have encouraged more people to invest in property, in turn maintaining steady demand in the housing market.

Limited Supply: The scarcity of developable land along with building restrictions have limited the supply of new homes, particularly in urban areas and coastal regions, contributing to price increases.

Foreign Investment: Interest from foreign buyers has been significant, accounting for around 15% of transactions in 2024. The top buying nationalities were, in this order: British, Germans, Dutch, Moroccans, French, Romanians, and Italians. The most sought-after regions were Illes Balears, Comunitat Valenciana, Canary Islands, Regiónde Murcia, Catalonia, and Andalusi

Monetary Policy: Low-interest rate policies implemented by the European Central Bank have facilitated access to affordable mortgages.

If we also review prices regionally across the country, it’s possible to identify quite substantial price variation between autonomous communities:

The Community of Madrid recorded an average price of €3,780/m², with an annual increase of over 17%.
The Balearic Islands reached an average price of €3,771/m², rising 15 % compared to the previous year.
The Canary Islands experienced a 17% increase, reaching €2,327/m².
Basque Country: The region recorded an average price of €3,157/m².
Catalonia: The average price stood at €2,615/m² (in the province of Barcelona: €3,007/m²).

Additionally, in terms of city-level price increases, Valencia led with a 24% rise, followed by Málaga (21.5%) and Madrid (20%). In contrast, Huesca was the only provincial capital where housing prices declined, with a drop of 0.4%.

Turning to the possible consequences of price increases, the following points become relevant –

Reduced Accessibility: Rising prices make it harder for lower-income groups, especially young people and middle-income families, to access homeownership.
Household Debt: To buy a home, families must take on higher mortgages, increasing their debt levels and potentially affecting their long-term financial stability.
Regional disparity: While regions such as Madrid, the Balearic Islands, and the Basque Country have the highest prices, other areas have seen more moderate increases, exacerbating territorial disparities.

Looking ahead, according to extensive analysis within the banking sector, house prices are expected to continue rising in the short term, but at a more moderate pace. Forecasts suggest:

2025: A 5%price increase.
2026: A 3%rise.
2027: A 2%increase, aligning more closely with inflation predictions.

Factors such as potential interest rate cuts by the European Central Bank, high levels of employment, property supply shortages, and high foreign demand, particularly in the major cities, the Mediterranean coast, and the islands, are likely to influence this trend – inevitably though, there is no absolute certainty in market direction from here.

And finally, it is of course essential for potential buyers to carefully assess their financial circumstances and consider market conditions before committing to buying. Seeking advice from mortgage professionals can be invaluable in navigating this complex landscape.

Should you have any inquiries regarding the content of this article, or any other questions relating to mortgages in Spain, please do not hesitate to reach out to us for further information.

Patricia Nadal

spain@spectrum-mortgages.com