Spanish Housing Market Contracts Amidst Challenges, but Soft Landing Expected

Spain’s housing market is contracting, but a soft landing remains likely

The Spanish housing market has experienced a notable decline recently. However, despite the sharp rise in interest rates, there are enough mitigating factors that make a soft-landing scenario likely. We forecast 1% average price growth this year and 0% next year.

 

Spanish housing market sees 21% drop in sales in April

The Spanish housing market has entered a clear slowdown recently, with several factors contributing to reduced demand for property. Rising interest rates, tighter credit conditions and global economic uncertainties, including geopolitical instability, have all dampened housing demand. In April, mortgage demand fell below its five-year average for the first time and the number of transactions also showed a clear downward trend in the first few months of this year. The latest figures from notaries, which are usually ahead of the official figures, suggest that this downturn is likely to continue in the coming months. According to the General Council of Notaries, home sales fell 21% in April compared to the same period last year, while the number of mortgage loans to buy a home fell by 32% year-on-year.

However, the downturn is much less severe than in other countries, where mortgage demand has fallen even more sharply. This can partly be attributed to increased interest from foreign buyers following the relaxation of Covid restrictions in 2020 and 2021. Property scarcity also remains a persistent problem. Demand has exceeded supply in recent years, slowing the downturn in demand. Moreover, Spain's economy has performed better than the eurozone average, helped by a rebound in tourism, which has also supported the housing market.