Real Estate Prices in Spain to Surge Beyond Expectations

Bankinter's latest report reveals that property prices in Spain are set to increase more than previously anticipated this year. Find out more.

Spanish bank Bankinter has revised its outlook on house prices for the year, now predicting a 3% increase instead of the previously forecasted 2% decline. The bank anticipates that Spanish house prices will continue to rise throughout the year, at least in line with estimated inflation in Spain. However, Bankinter does acknowledge the possibility of a potential slowdown.

Real Estate Prices in Spain to Surge Beyond Expectations | Bankinter Report

In 2023, Spanish house prices saw a significant increase of 4.2%, surpassing the initial projection of 1.2% growth. Looking ahead to 2025, Bankinter foresees a continued upward trend with Spanish property prices expected to rise by around 2%. This optimistic outlook is attributed to several factors, including the strength of the labor market, a shortage of housing supply, the sharp increase in rental prices, and the anticipated interest rate cuts by the European Central Bank (ECB) set to begin this month.

Bankinter estimates a shortage of over 50,000 properties annually, in comparison to a demand of 150,000 homes each year. The deficit is particularly concentrated in major cities such as Madrid, Barcelona, Valencia, and Bilbao, as well as in popular coastal regions like the Mediterranean coast, the Canary Islands, and the Balearic Islands. Additionally, the rise in rental costs due to a lack of available rental housing has led to a 15% decrease in the past 12 months.

The uncertainty surrounding legal regulations, such as the Housing Law, along with the rise in alternative housing options like seasonal or tourist rentals, have further exacerbated the housing market challenges. Furthermore, the potential impact of interest rate cuts on the 12-month Euribor rate could add strain to Spanish house prices in the future.

Bankinter projects that the 12-month Euribor rate will reach 3.25% by the end of 2024, dropping to 2.75% in 2025. This decrease is expected to result in a moderate decline in mortgage interest rates. In terms of housing transactions, the bank anticipates a 5% decrease in 2024, a slight improvement from the previous estimate of 7%.

Bankinter's revised forecast paints a more positive picture for the Spanish housing market, with expectations of continued price growth driven by various economic factors and market conditions.