RESIDENTIAL property sales have been shrinking consistently throughout 2023, but latest figures show this trend is relenting.
Property market round-up for June 2023
30/07/2023
HOME prices in Spain show a substantial year-on-year increase despite rising mortgage interest and a general fall in sales, according to a leading valuation group.
Tinsa publishes monthly figures showing fluctuations in market prices for residential property, and has recently released data for June 2023.
Although Tinsa expects home values to experience slower growth in the medium term as a result of Eurozone interest rates soaring, the property survey society says many sought-after areas in Spain are 'hanging on' – or even 'thriving'.
The association's research reveals that home prices went up across the board by 4.6% between June 2022 and June 2023, although this growth was less marked than year-on-year rises seen in May, at 4.8%.
New builds rose in value by 6.4% in June this year, based upon the same month in 2022.
Fastest Euribor rises in history
Overall, residential property prices have been climbing non-stop since 2021, although at a gradually slower rate due to drastic financial decisions taken by the European Central Bank (BCE).
After more than six years with the Eurozone interest rate in minus figures – since February 2016 – they rocketed to around 4% within 10 months, and have gone up yet again in July by 0.25 percentage points.
The Euribor, as the common currency interest rate is known, currently stands at 4.153%.
Exactly one year ago, in July 2022, the Euribor was just 0.992% - and only rose above zero for the first time in April, when it hit 0.013%.
Rate increases at this pace have never been seen before in the history of the euro.
Tinsa cites two factors that have kept the property market reasonably buoyant despite the somewhat extreme Euribor rate hikes: The popularity of Spanish homes to overseas buyers, who are less likely to need a mortgage, and 'stability in employment' in Spain which is 'contributing to consumer confidence and household solvency'.
“To this end, residential demand is becoming more moderate, but without plummeting, and average home prices are maintaining the trend towards stabilising, or slowing down very gradually,” clarifies Cristina Arias, service manager for research at Tinsa.
Where the growth is: 'Resistant' regions
Price growth slowdown in the past eight months has been most notable in provincial capital cities, says Tinsa – particularly very large metropolitan areas.
Back in November 2022, residential property values in cities had scaled fresh heights of growth – 8.5% in 12 months – but by June 2023, the inter-annual rise was just 4.1%.
Outside the main hubs of the cities, in the inner and outer suburbs, the shrinking in price growth was less acute: On average, home values rose by 6.6% between June 2022 and June 2023.
Traditional tourism and expatriate belts, such as the Costas and islands, registered a sharp fall in value growth in March – just 2.7% year on year – but June has seen a healthy recovery, with an increase of 4.4% on prices of the same month in 2022.
The island regions are showing the greatest resistance to slowdown, with price rises consistent all year; in June 2023, a typical home in the Balearics or the Canaries was 5.8% more expensive than in June 2022.
Mediterranean regions saw price growth in free-fall between late 2022, when year-on-year increases were above 8%, and spring 2023 when they fell to just over 2%, but the usual spike in demand seen in summer has given home values a boost – June saw annual rises of 4.4%.
Nationally, residential property values have reached highs not seen since July 2011, when the bursting of the 'housing market bubble' really began to bite and home prices fell through the floor.
In big cities and provincial capitals, property values have not been as high as they are now since 2010.
Homes in Spain remain 20% cheaper than their historic highs of 2007, when residential property reached an unnatural and unsustainable peak that triggered the start of the housing market crisis.
Sales and mortgages down despite healthy price growth
Home price growth seen so far in 2023 contrasts sharply with data for sales and new mortgages – both of these have taken a hit as a result of the Euribor hike.
Figures for numbers of sales and home loan contracts signed are taken from notaries, since it is these public figures who rubber-stamp all property transactions.
The most recent statistics are for the month of May 2023, which saw a year-on-year drop of 11.4% in the number of homes bought and sold.
Mortgages incepted in May this year were 24% down on numbers for May 2022.
The apparent dichotomy of rising property prices versus shrinking sales and mortgages has a simple explanation, according to the Bank of Spain.
This institution reveals that the typical profile of a homebuyer in the country is earning an upper-middle or high income, is aged between 30 and 49, with at least graduate-level education, and existing equity or savings.
As a result, these buyers normally need a much lower mortgage, or are even able to purchase a home in cash.
Also, Spain's typical first-time buyers are of a near-identical profile: In their 40s, financially comfortable, and seeking a property they plan to live in for the rest of their lives.
This is in contrast to other European countries where a first-time buyer is much younger, seeking a mortgage with a considerably higher loan-to-value ratio, and purchasing a smaller, cheaper home to 'get a foot on the property ladder' with a view to upsizing gradually over their adult lives.
'Full effects of rate rises still to come'
Despite the average homebuyer in Spain being, seemingly, less affected by mortgage rate rises, the Bank of Spain warns that the impact of the Euribor hike is not yet being seen in full.
Mortgages in Spain are reviewed annually, meaning not everyone's repayments will have gone up yet – those not due for revision until the end of this year will still be at the much more affordable levels seen when the Euribor was very low.
Unless the BCE opts to reduce rates – which it will not do until it considers Eurozone inflation has been brought under control – the Bank of Spain believes average residential property prices in Spain will fall by at least 6% over the next two years.
This forecast is based upon the experience of the housing market crash: In the two years that followed, home values fell by 11%, but did not reach their minimum until 2014.
By then, Spain was starting to see an upturn in the property market, with interest rates falling and demand beginning to rise – but the delayed effects of the 'crash' meant home values had dropped by an average of 59% nationwide.
Whilst this recent history is cited as a guide to future property price evolution, neither Tinsa nor the Bank of Spain predict such a dramatic scenario.
Spain's own inflation rates are among the lowest in the Eurozone and close to the BCE's target of 2% - in contrast to other common currency nations where inflation is almost, or already is, in double figures.
Additionally, the housing market crisis came with a long recession and the highest unemployment figures in living memory, given that a huge slice of the job market was directly dependant upon property building and sales.
Cash buyers may keep market afloat
The flip-side to rocketing mortgage repayments is that the dramatic hike in the Euribor will eventually create an impact on savings.
Currently, in the early months of the rate rise crisis, those with money held on deposit are not seeing any real difference in interest paid on their savings – but this will soon change as the economy 'catches up'.
In the same way that not everyone's mortgage repayments have risen yet, interest on savings has not seen the full impact of the situation, especially where rates are fixed each year.
When savings interest begins to reflect the Euribor rise, it is likely to mean more available funds for those who are in a position to buy property without a mortgage.
Additionally, people with increasing savings may be reviewing their investment options in case the Euribor comes down again and their interest-earning 'honeymoon' ends – and property is one type of investment that typically increases in value beyond the rate of inflation, particularly long term.
Related Topics
HOME prices in Spain show a substantial year-on-year increase despite rising mortgage interest and a general fall in sales, according to a leading valuation group.
Tinsa publishes monthly figures showing fluctuations in market prices for residential property, and has recently released data for June 2023.
Although Tinsa expects home values to experience slower growth in the medium term as a result of Eurozone interest rates soaring, the property survey society says many sought-after areas in Spain are 'hanging on' – or even 'thriving'.
The association's research reveals that home prices went up across the board by 4.6% between June 2022 and June 2023, although this growth was less marked than year-on-year rises seen in May, at 4.8%.
New builds rose in value by 6.4% in June this year, based upon the same month in 2022.
Fastest Euribor rises in history
Overall, residential property prices have been climbing non-stop since 2021, although at a gradually slower rate due to drastic financial decisions taken by the European Central Bank (BCE).
After more than six years with the Eurozone interest rate in minus figures – since February 2016 – they rocketed to around 4% within 10 months, and have gone up yet again in July by 0.25 percentage points.
The Euribor, as the common currency interest rate is known, currently stands at 4.153%.
Exactly one year ago, in July 2022, the Euribor was just 0.992% - and only rose above zero for the first time in April, when it hit 0.013%.
Rate increases at this pace have never been seen before in the history of the euro.
Tinsa cites two factors that have kept the property market reasonably buoyant despite the somewhat extreme Euribor rate hikes: The popularity of Spanish homes to overseas buyers, who are less likely to need a mortgage, and 'stability in employment' in Spain which is 'contributing to consumer confidence and household solvency'.
“To this end, residential demand is becoming more moderate, but without plummeting, and average home prices are maintaining the trend towards stabilising, or slowing down very gradually,” clarifies Cristina Arias, service manager for research at Tinsa.
Where the growth is: 'Resistant' regions
Price growth slowdown in the past eight months has been most notable in provincial capital cities, says Tinsa – particularly very large metropolitan areas.
Back in November 2022, residential property values in cities had scaled fresh heights of growth – 8.5% in 12 months – but by June 2023, the inter-annual rise was just 4.1%.
Outside the main hubs of the cities, in the inner and outer suburbs, the shrinking in price growth was less acute: On average, home values rose by 6.6% between June 2022 and June 2023.
Traditional tourism and expatriate belts, such as the Costas and islands, registered a sharp fall in value growth in March – just 2.7% year on year – but June has seen a healthy recovery, with an increase of 4.4% on prices of the same month in 2022.
The island regions are showing the greatest resistance to slowdown, with price rises consistent all year; in June 2023, a typical home in the Balearics or the Canaries was 5.8% more expensive than in June 2022.
Mediterranean regions saw price growth in free-fall between late 2022, when year-on-year increases were above 8%, and spring 2023 when they fell to just over 2%, but the usual spike in demand seen in summer has given home values a boost – June saw annual rises of 4.4%.
Nationally, residential property values have reached highs not seen since July 2011, when the bursting of the 'housing market bubble' really began to bite and home prices fell through the floor.
In big cities and provincial capitals, property values have not been as high as they are now since 2010.
Homes in Spain remain 20% cheaper than their historic highs of 2007, when residential property reached an unnatural and unsustainable peak that triggered the start of the housing market crisis.
Sales and mortgages down despite healthy price growth
Home price growth seen so far in 2023 contrasts sharply with data for sales and new mortgages – both of these have taken a hit as a result of the Euribor hike.
Figures for numbers of sales and home loan contracts signed are taken from notaries, since it is these public figures who rubber-stamp all property transactions.
The most recent statistics are for the month of May 2023, which saw a year-on-year drop of 11.4% in the number of homes bought and sold.
Mortgages incepted in May this year were 24% down on numbers for May 2022.
The apparent dichotomy of rising property prices versus shrinking sales and mortgages has a simple explanation, according to the Bank of Spain.
This institution reveals that the typical profile of a homebuyer in the country is earning an upper-middle or high income, is aged between 30 and 49, with at least graduate-level education, and existing equity or savings.
As a result, these buyers normally need a much lower mortgage, or are even able to purchase a home in cash.
Also, Spain's typical first-time buyers are of a near-identical profile: In their 40s, financially comfortable, and seeking a property they plan to live in for the rest of their lives.
This is in contrast to other European countries where a first-time buyer is much younger, seeking a mortgage with a considerably higher loan-to-value ratio, and purchasing a smaller, cheaper home to 'get a foot on the property ladder' with a view to upsizing gradually over their adult lives.
'Full effects of rate rises still to come'
Despite the average homebuyer in Spain being, seemingly, less affected by mortgage rate rises, the Bank of Spain warns that the impact of the Euribor hike is not yet being seen in full.
Mortgages in Spain are reviewed annually, meaning not everyone's repayments will have gone up yet – those not due for revision until the end of this year will still be at the much more affordable levels seen when the Euribor was very low.
Unless the BCE opts to reduce rates – which it will not do until it considers Eurozone inflation has been brought under control – the Bank of Spain believes average residential property prices in Spain will fall by at least 6% over the next two years.
This forecast is based upon the experience of the housing market crash: In the two years that followed, home values fell by 11%, but did not reach their minimum until 2014.
By then, Spain was starting to see an upturn in the property market, with interest rates falling and demand beginning to rise – but the delayed effects of the 'crash' meant home values had dropped by an average of 59% nationwide.
Whilst this recent history is cited as a guide to future property price evolution, neither Tinsa nor the Bank of Spain predict such a dramatic scenario.
Spain's own inflation rates are among the lowest in the Eurozone and close to the BCE's target of 2% - in contrast to other common currency nations where inflation is almost, or already is, in double figures.
Additionally, the housing market crisis came with a long recession and the highest unemployment figures in living memory, given that a huge slice of the job market was directly dependant upon property building and sales.
Cash buyers may keep market afloat
The flip-side to rocketing mortgage repayments is that the dramatic hike in the Euribor will eventually create an impact on savings.
Currently, in the early months of the rate rise crisis, those with money held on deposit are not seeing any real difference in interest paid on their savings – but this will soon change as the economy 'catches up'.
In the same way that not everyone's mortgage repayments have risen yet, interest on savings has not seen the full impact of the situation, especially where rates are fixed each year.
When savings interest begins to reflect the Euribor rise, it is likely to mean more available funds for those who are in a position to buy property without a mortgage.
Additionally, people with increasing savings may be reviewing their investment options in case the Euribor comes down again and their interest-earning 'honeymoon' ends – and property is one type of investment that typically increases in value beyond the rate of inflation, particularly long term.
Related Topics
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