Average house prices in Spain, compared to other countries

The Spanish housing sector is one of the most dynamic and active in Europe, attracting interest from both domestic and international buyers. The country’s varied landscapes, favourable climate, and rich cultural heritage make it a popular destination for homeowners. To fully appreciate Spain's property market, it is essential to compare average house prices not only within the Eurozone but also with non-Eurozone countries. This broader comparison offers a comprehensive perspective on Spain’s position in the global property market, particularly in terms of affordability, market trends, and cost per square metre.

Overview of the Spanish property market

The Spanish property market has undergone significant changes over the past few decades, marked by periods of rapid growth, economic challenges, and subsequent recoveries. As of the second quarter of 2024, average house prices in Spain have continued to rise, even as demand shows signs of softening. This trend indicates that factors such as supply constraints, inflation, and ongoing investor interest continue to drive prices upward.

House prices in the Eurozone: A comparative look

To understand how Spain’s house prices stack up within the Eurozone, we must consider the broader context. The Eurozone consists of European Union member states that have adopted the euro as their official currency, excluding countries like Sweden, Denmark, Hungary, and Poland. These countries share a unified monetary policy managed by the European Central Bank.

In comparison, the average cost per square meter in Spain is generally lower than in many other Eurozone countries. This affordability makes Spain an attractive option for potential homeowners. However, it's crucial to recognize that affordability varies significantly across different regions within Spain.

Comparing Spain's house prices with Eurozone and non-Eurozone countries

To understand the relative affordability and appeal of Spain’s real estate market, it is crucial to compare its average house prices with those in both Eurozone and non-Eurozone countries. This comparison highlights Spain's competitive position within Europe and beyond.

Spain compared to other Eurozone markets

Within the Eurozone, Spain's average house price per square metre is lower compared to countries like France, Germany, and the Netherlands. According to data from the International House Price Database by the Dallas Federal Reserve, Spain’s prices are approximately 20-30% lower than those in higher-cost countries. Here are a few significant examples:

• France: Particularly in Paris, property prices are among the highest in Europe. The average cost per square metre in Paris exceeds €10,000, while in Spain’s major cities, prices typically range from €3,500 to €5,000 per square metre. This stark difference highlights Spain’s relative affordability within the Eurozone.

• Germany: Germany’s real estate market is known for its stability and high prices, especially in cities like Munich and Berlin, where costs per square metre range from €7,000 to €9,000. In comparison, even Spain’s most expensive urban areas offer more affordable options.

• Netherlands: The Dutch property market, particularly in cities like Amsterdam, also features higher prices than Spain. With average costs per square metre often exceeding €7,000 in central locations, the Netherlands is significantly more expensive, reinforcing Spain’s appeal as a more affordable alternative within the Eurozone.

Spain's housing affordability beyond the Eurozone

When extending the comparison to non-Eurozone countries, Spain’s real estate market continues to stand out for its affordability, although the dynamics vary depending on the country.

• United Kingdom: The UK, especially London, has one of the most expensive real estate markets globally. The average cost per square metre in London can exceed €12,000, which is more than double that of Madrid or Barcelona. Even in cities like Manchester or Birmingham, prices are higher than in many Spanish cities, making Spain an attractive option for UK buyers seeking a more affordable property market.

• United States: The US property market is highly diverse, with significant regional variations. Major cities like New York, San Francisco, and Los Angeles have average costs per square metre ranging from €8,000 to €15,000, far exceeding those in Spain. However, in some US cities, particularly in the Midwest and South, property prices are more comparable to those in Spain. Despite this, Spain’s lower cost of living and appealing lifestyle continue to attract international buyers.

• Australia: Australia’s housing market, particularly in cities like Sydney and Melbourne, is known for its high prices. The average cost per square metre in Sydney can reach up to €10,000, making it significantly more expensive than most Spanish cities. This affordability gap makes Spain an appealing alternative for those looking to invest in international property markets.

• Canada: Canada, with such representative and highly valued cities as Toronto, Montreal and Vancouver, also features high real estate prices, often exceeding €8,000 per square metre in prime locations. In contrast, Spain offers more affordable options, particularly in regions outside the major cities, making it an attractive destination for Canadian buyers.

Existing home prices vs. new constructions

A key aspect of the Spanish property market is the difference in pricing between existing homes and new constructions. Existing homes generally come at a lower price point, especially in less urbanised areas, aligning with broader trends observed in both Eurozone and non-Eurozone markets.

In Spain, the average price for an existing home is typically 15-20% lower than that of a new build. This trend is particularly noticeable in cities like Valencia and Seville, where older properties in central locations offer significant savings compared to newly developed areas. This is due to factors such as the age and condition of the buildings, the lack of modern amenities, and the costs associated with renovations, which is higher in buildings that can even be a century old and cannot benefit from energy efficiency upgrades, amongst other things.

Additionally, new constructions often come with updated facilities and are built to higher modern standards, making them more expensive. However, in high-demand cities like Madrid and Barcelona, the price gap between existing homes and new constructions is narrower, reflecting the premium associated with central urban locations.

Key factors shaping house prices in Spain

Several factors contribute to the current state of Spain's real estate market, influencing both the cost per square metre and overall market trends:

• Economic stability: Spain’s economy has shown resilience, recovering from the 2008 financial crisis, something that took almost a decade, and maintaining steady growth. This stability has contributed to the gradual rise in house prices, particularly in major cities and coastal regions.
• Inflation: Recent inflationary pressures have driven up construction costs, leading to higher property prices. This impact is particularly evident in new constructions, where developers pass on increased costs to buyers.
• Demand vs. supply: Spain’s property market is characterised by a supply-demand imbalance. While demand has decreased somewhat, prices continue to rise due to limited housing supply, especially in urban and coastal areas.
• Foreign investment: Spain remains a top destination for foreign investors, particularly from non-Eurozone countries such as the UK, the United States, and China. These buyers are often attracted by Spain’s relatively lower prices compared to their home countries, further driving demand in certain areas.
• Tourism and short-term rentals: The booming tourism industry and the popularity of short-term rentals have significantly influenced property prices in tourist-heavy regions. Investors buying properties for short-term rentals have driven up prices, making it more challenging for locals to afford housing in these areas.

Cost of living and its impact on the property market

Spain’s relatively low cost of living compared to other Western European countries and many non-Eurozone countries is a significant factor influencing the housing market. The cost of living in Spain is lower than in the UK, the US, and Australia, making Spain an attractive destination for expatriates, retirees, digital nomads, and investors seeking a high-quality lifestyle at a lower cost.

This affordability extends to the property market, where lower living costs can make homeownership more accessible. However, it also means that local incomes are generally lower, which can limit the purchasing power of domestic buyers, especially in regions where property prices are rising due to foreign investment and tourism-driven demand.

Future trends in the Spanish real estate market

Several key trends are expected to influence Spain's real estate market, including urbanization, sustainability, and regulatory changes. Interest rates and technological advancements will also play a crucial role in shaping market dynamics.

The following line graph shows house price trends from 2019 to 2024, comparing Spain with other countries.

Looking forward, several trends are expected to shape Spain's real estate market:

• Sustainable development: Increasing emphasis on sustainability is likely to drive the development of eco-friendly properties. These green buildings may command higher prices, particularly among environmentally conscious buyers from both Eurozone and non-Eurozone countries.
• Urbanisation: The trend towards urbanisation is expected to continue, with more people moving to cities for better job opportunities and amenities. This migration will likely push house prices higher in urban areas while keeping rural areas more affordable.
• Interest rates: The direction of interest rates in the Eurozone and globally will significantly impact the property market. If interest rates rise, borrowing costs will increase, potentially slowing down the market. Conversely, low-interest rates could fuel further growth.
• Regulatory changes: The Spanish government has introduced various measures aimed at controlling the real estate market, such as rent caps and restrictions on short-term rentals. These regulations could influence market dynamics, particularly in high-demand areas.
• Technological advancements: The adoption of technology in real estate, from virtual property tours to blockchain for transactions, is expected to increase. These innovations will likely attract more international buyers by making the market more accessible and transparent.

Why Spain stands out in the global property market

Spain’s housing market offers a unique blend of affordability, growth potential, and investment opportunities. Compared to both Eurozone and non-Eurozone countries, Spain’s average house prices are generally lower, making it an attractive destination for a wide range of buyers. The market is influenced by various factors, including economic stability, inflation, foreign investment, and technological advancements.

Spain’s relatively low cost of living, combined with its diverse and appealing lifestyle options, further enhances its attractiveness, particularly for buyers from countries with higher property prices. As the market continues to evolve, Spain is likely to remain a key player in the global property sector, offering competitive opportunities for homeowners and investors alike.

In this international context, Spain stands out as a country where buyers can find value and quality, making it a compelling choice for those looking to invest in or relocate to Europe. Whether for personal use or as an investment, Spain offers a diverse range of options, underpinned by a stable economic environment and a rich cultural heritage.