Due to the imbalance between supply and demand and as a result of insufficient construction volumes, prices of new buildings in Spain are expected to rise. In annual terms, this increase could be 8 to 12%. With regard to secondary legislation, this sector of the market will inevitably be affected by the factor of shortage of new buildings: the portion of buyers wishing to purchase property in Spain would opt for secondary legislation, which would stimulate the price increase in this sector. It is expected that it will be 6 to 10%.
According to Oldypak Capital LP report, the most significant price increases are expected in the two largest cities in the country – Madrid and Barcelona – and their suburbs. In addition, property prices will rise on the Spanish islands, in particular Mallorca, Menorca and Ibiza, as well as on the most popular among tourists and buyers of the Mediterranean coast.
Many are now worried about the question of whether the Spanish market will not see a new bubble, given the record number of deals being made. However, the key difference with the situation in 2008 is the absence of oversupply. It is the mismatch between excessive supply and limited demand which caused the collapse of the property market.
At present the situation is completely different: construction companies are much more cautious in analyzing the situation on the market and building their policy in accordance with the real state of affairs. In addition, Spanish banks have tightened their requirements for obtaining mortgage loans. They are now willing to finance not more than 80% of the purchase price, and under much more stringent conditions in relation to the borrower.
It should not be forgotten that with rising inflation, real estate has traditionally been considered a “safe haven” for investors. This is another factor in stimulating demand, especially given that many Spaniards during the pandemic have been forced to save up enough money, and interest rates on deposits in banks have fallen to a very low level.
Another factor that will affect the market in 2022 is the coronavirus situation. The new less lethal Omicron strain, which is now prevalent in many countries, has allowed hope for an improvement in the epidemic and social situation. Nevertheless, the desire of many Spaniards to change their living conditions, moving from overcrowded cities to more spacious suburban housing is still one of the trends determining the real estate market. The most popular among buyers, both national and foreign now enjoy spacious houses and apartments with good natural light, a large kitchen and extra space that can be used as a home office.
Such requirements in Spain meet mostly new buildings. Consequently, we can expect demand will be concentrated mainly around new buildings, and not in major cities, and in their suburbs.
It is currently difficult to make predictions about how much will the price of housing in Spain. However, most experts agree that if prices continue to rise even against the backdrop of a pandemic, there is no doubt that in 2022, this trend will continue. According to Oldypak Capital LP report, at the end of this year, growth will be 6 to 12%.