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Analysts foresee property price drops in Spain in 2023: Where and by how much?

The Local Spain
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Analysts foresee property price drops in Spain in 2023: Where and by how much?
Most property analysts are forecasting declines of between 2 percent and 5 percent by 2024. Photo: Alycia Wicker/Pixabay.

There has been almost a decade of consecutive house price rises in Spain, but the end of 2023 looks set to bring this upward cycle to an end according to property market analysts.

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Many property experts foresee a fall in prices in Spain in the coming months, though they are not anticipated to be huge and will not be spread evenly across the country. In many parts of the country, particularly big cities, prices will continue to rise.

Why are prices falling? Economic uncertainty. Everyone has noticed the economic pinch in 2022 and 2023, particularly with regards to the cost of living and borrowing costs.

READ ALSO: What the Euribor rise means for property buyers and owners in Spain

Property prices in some parts of Spain will reportedly fall mainly as a result of the rise in mortgage rates, the persistence of high underlying inflation, and the tightening of bank credit, a confluence of factors that has deterred many potential buyers from purchasing property and forced them to stay in the rental market instead.

Ángel Martínez León, member of the General Council of Real Estate Agents in Spain, told Spanish newspaper El Independiente that "house prices during the first half of the year have stagnated due to the rise in interest rates, which has an impact on the pockets of consumers and families."

Spain’s recent ongoing political stalemate hasn’t helped things either. "It has been a summer of political uncertainty and, therefore, of certain economic instability, which is detrimental to any market," León says.

“If the situation does not stabilise,” he adds, “the average price could end up falling at the closing of sales transactions, especially second-hand properties".

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How much will prices decrease by?

A panel of property analysts speaking to El País agreed that they all see signs of moderation in the market moving towards the end of the year, with most forecasting declines of between 2 percent and 5 percent by 2024. The consensus was that sales and purchases will continue to decline.

Economy professor at Barcelona University Gonzalo Bernardos went further and predicted price drops of 5 percent by the end of 2023 and then an additional 3 percent fall for the first half of 2024.

READ ALSO: Where in Spain are rent prices rising the most?

Yet despite the increasing cost of mortgages making it difficult for some people to access home ownership, demand remains strong in metropolitan centres and there are big market differences between different parts of the country. It does seem that in certain parts of Spain the decreases could become more marked as the year draws to a close in the run-up to 2024.

Property price fluctuation depends significantly on where in Spain it is. In larger cities and coastal areas and islands, for example, there is unlikely to be a fall in prices. It is in inland towns and cities, as well as more rural areas, where prices are likely to drop.

However, some experts seem to think that any falls in property prices will be a short-term phenomena. "In the long term, it is a bullish market that will continue to rise in the coming years at different speeds... (but) in some cases we will see a significant drop," says EAE Business School professor Víctor Fermosel.

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Where in Spain will there be property price drops?

Fermosel believes that “in cities like Madrid it is very difficult for this to happen, in environments where investment, the economy and a whole community are pulling the national economy," he says. He also points to Pamplona, Valencia, Alicante and the islands as examples of placesto expect price rises.

León agrees that major cities are unlikely to see falls in property prices: “Large capital cities and, within these, in neighbourhoods and high-end residential areas" will likely see rises.

The market expert even suggests that there could be a price disparity within cities and municipalities heading into the end of the year, with some areas rising and others falling: “Talking about areas or territories of the country in a generic way could be misleading, as the real estate market does not behave in the same way within the same metropolitan area," he adds.

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Generally speaking, experts believe that the areas least affected by the fall in transactions (and thus in prices as a result) will be major cities, the residential coastal areas, and Spain’s islands. These large provincial capitals and their metropolitan areas, such as Madrid, Barcelona, Valencia, Malaga, Seville, Zaragoza, Murcia and Bilbao, are unlikely to see price drops because demand is still strong.

On the other hand, prices in Spain’s inland cities and rural areas are more likely to be affected by falling prices.

Recent house price data in the report Projection of Average Residential Prices 2023-2025, published by appraisal company Euroval, demonstrates this trend. Three provincial capitals have already seen price falls: Zamora (-0.84 percent), Palencia (-1.38 percent) and Soria (-1.40 percent). 

Prices also fell in the provinces of Cáceres (-1.7 percent), Segovia (-1 percent), Guipúzcoa (-0.7 percent) and Salamanca (-0.6 percent).

Interested buyers may be disappointed by the fact that most of these locations are not close to the beach, but if you're looking to bag a cheap property in Spain your best bet is to head to Spain's interior. A recent study by Caixabank Research found that coastal properties in Spain are 75 percent more expensive on average than those that are inland. 

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