In Spain, rising interest rates on mortgage loans are an obstacle for the real estate market. According to data from the Spanish statistical service INE, the number of mortgage loans granted in July 2023 was 18.6% lower than the same month last year. The number of transactions also cooled significantly and was 10.1% lower in July than a year ago. Still, the slowdown is not as strong as in other countries. There are several elements that differentiate the Spanish real estate market from other real estate markets in the eurozone, the first distinguishing factor being the resilience of demand.
There are several factors supporting the demand for housing. The number of Spanish households is growing strongly, partly due to immigration. In addition, the real estate market is also supported by stronger economic growth than the eurozone average. According to our forecasts, the Spanish economy will grow by 2.5% in 2023, compared to only 0.5% average growth in the eurozone. The more resilient economy has also reduced the unemployment rate more than in the rest of the eurozone, although it is still above the region’s average. A combination of higher nominal wage growth and lower inflation has also seen real wage growth return to positive territory, with Spanish households currently gaining purchasing power. This tight labor market and rebound in wage growth improve gross disposable income. Many families were able to accumulate considerable savings during the pandemic, which they are now using to purchase a home.
Finally, strong foreign demand for Spanish properties is putting additional upward pressure on house prices. During the pandemic, this foreign demand had completely disappeared due to travel restrictions, but now it has completely returned. This explains why house price growth in tourist regions such as the Balearic Islands, the Canary Islands and the Mediterranean region is above the national average. With the strong recovery in tourism after the pandemic, more and more owners are also keeping their properties free to rent to tourists, creating additional tension in the property market.