Current property price growth in Spain

Buying housing in large cities and capitals of provinces now is 5.1% more expensive than in March 2020, before the outbreak of Covid-19, and 9.6% more costly than in October last year due to the rise of demand.

Normality is returning to the housing market too. The little that might have been shaken by the impact of Covid in 2020 is water under the bridge. On the other hand, the sale of apartments awakens again, encouraged by a demand that has flooded out after the lockdown, with more savings than ever and a great desire to move house. In the month of October, buying an apartment is already 5.1% more expensive than in March 2020, just before the outbreak of the pandemic, according to Tinsa. That means that the price of housing has not only recovered to pre-crisis levels, but exceeds them.

"The real estate sector is sustaining the dynamic of recovery that began in the first months of 2021 within a framework of both internal factors (high demand and a weighted supply) and external factors (rising inflation in an environment of low interest rates and pressure on costs), which point to a tightening," explains Cristina Arias, director of the Tinsa Research Department.

Sales and purchases came back to life again after the slowdown and, at the beginning of this year, they gained momentum. If in the first months of the year only 39,000 transactions per month were registered, in August this number was close to 50,000, something not seen in the same month since 2007.

The capitals and large cities are pulling the cart. Basically because it is in these markets where the internal factors influence the most: high demand and supply weighed down. There, the price of apartments is 6.4% above March 2020 and 9.6% above the price of October 2020.

The boost in demand is such that it already "exceeds the activity levels of 2019", says Andrea de la Hoz, senior analyst at Tinsa's Research Department. Faced with the return of buyers, supply continues to be scarce. "This scenario, combined with a monetary policy of low interest rates, liquidity and available savings, as well as the increase in consumer confidence and the containment of unemployment, sustain the pace of activity and open up the possibility of price tensions," adds De la Hoz.

"The changes in 2021 reflect the dynamism of the sector driven by sustained demand, although in a rather moderate way than the year-on-year changes, accentuated by comparing current growth with the falls of 2020", clarifies Arias on the difference between the current comparison with the prices of October 2020 and those of March last year. This is what can be seen especially in the markets of the Mediterranean coast.

In these cities, the recovery with respect to October 2020 has been particularly notable – 15.7%, and even exceeds the rise in capitals of provinces (9.6%). In October 2020, the restrictions on mobility left tourism out of action, and this affected a large part of the demand for housing on the coast, made up of foreign buyers. This, added to the last lockdown (with bottlenecks in the registers and the accumulation of unsold apartments) ended up in falling prices.

The rise in housing in the Mediterranean compared to pre-pandemic prices is also striking, standing at 6.1%. An increase that could be due, on the one hand, to the gradual restoration of mobility, which has brought many tourists and potential buyers back to Spanish holiday destinations. The boost in domestic demand, especially in second homes on the beach, must also be noted. The post-holiday slowdown, however, has been rather noticeable, and in October prices fell by 0.8% compared to September, something that also occurred on the islands (-1.7%).

The price of housing in the Balearic and Canary Islands is the one that has managed to raise its head the least. It is barely 0.1% above the level we've seen in March 2020, although the improvement compared to October of that year is noticeable, and stands at 8.6%. However, the greater slowness of the islands is not necessarily associated with lower demand, but rather with prices already being at very high levels. The value of apartments in the Balearic and Canary Islands is only 12.1% away from exceeding the levels of 2007, when the market was in the midst of a real estate boom. With prices so close to hitting the ceiling, rises are moderating.

With a slower evolution than the general index, metropolitan areas show an annual increase of 7.7% and 5% compared to March 2020, while in the smaller towns of the peninsular interior and the Atlantic coast, the increase is moderated to 5% year-on-year and 4.3% above pre-crisis levels.

"Despite the favourable expectations for demand, the continuity of the recovery will depend on macroeconomic factors with direct implications for the real estate market," says Cristina Arias.

Since hitting bottom in the midst of the financial crisis in February 2015, property prices have recovered by an average of 24% in Spain.

The price of housing in the Balearic and Canary Islands is barely 0.1% higher than before the pandemic. These are the destinations that have recovered the least compared to pre-crisis levels, a far cry from the rises of more than 5% in large cities or Mediterranean destinations.

But the reason for the slowdown in the market on the islands is not necessarily to do with the lack of demand, but rather the current state of the housing price cycle. While in the rest of Spain prices are still 29% below their peak, on the islands housing is only 12% away from surpassing the highs of 2007, at the height of the property boom.

Although the big cities are the driver of the recovery from pre-pandemic levels, if we take into account the last year, the biggest rise can be seen on the Mediterranean coast. In coastal cities, housing has shot up by 15.7% in 2020, compared to October 2007, according to Tinsa.

The recovery, if we take March 2020 as a starting point, just before the impact of Covid-19, is somewhat lower, but still exceeds pre-covid levels: apartments are 6.1% more expensive. These rises are fuelled by the return of the foreign buyer, thanks to the relaxation of restrictions.

Housing in metropolitan areas is 5% more expensive in October than before Covid. This is a striking rise! Although the property market in large cities and along the coast has been showing large rises in recent years, metropolitan areas and medium-sized cities have seen moderate changes.

In this case, the recovery of the metropolitan areas and their rise above pre-crisis levels would be due to the increase in demand for housing on the outskirts of large cities, partly as a side effect of the increase in the price of apartments in the capital cities, partly due to the type of housing on the outskirts, where it is possible to find larger options at a lower price.

Source: expansion.com/inmobiliario/viviendas/2021/11/06/6186cccde5fdea645b8b45d2.html