RESIDENTIAL property prices rose again in July outside of Spain's major cities, with homes for sale on the islands now breaking post-recession records.
Leading quantity surveyor association TINSA says the average price tag is now 3% higher than a year ago, and that the most recent full-month figures – for July 2024 – reveal an increase of 0.7% in values compared with those of June.
Whilst property price rises are beginning to stagnate in the country's largest metropolitan areas and in land-locked provinces, those in more traditional tourism zones are seeing an across-the-board increase in value.
This is particularly the case in the Balearic and Canary Islands, where property price hikes between July 2023 and July 2024 have reached 8.6% - nearly three times the rate of inflation.
In these offshore regions, average home prices are now above the historic highs seen in 2007 and early 2008 – a time when property values across the country reached unrealistic heights never witnessed before and which preceded a nationwide housing market crash, provoking a long recession.
There is no suggestion of a recurrence of this grim period in Spain's recent history, however: The typical value of a residential property on the islands is around 1.7% above that of late 2007 which, allowing for inflation over the 17 years since, responds more to a healthy demand than an unsustainable property boom.
Coastal tourism enclaves see above-average price increases
TINSA considers this demand to be location-specific, given the Balearics' and Canaries' status as mature and well-established holiday destinations, and says this same factor is also driving up home prices elsewhere on Spain's Mediterranean seaboard.
All down the east coast, homes have risen in value by an average of 6.2% in the past year, with a typical increase in the last month of around 0.4% on the mainland side of the Mediterranean, compared with 1.1% in the Balearics.
The Balearic Islands have seen an 8.6% rise in property values in the past year. The photo (by Santa Eulària des Rius tourism board) shows the Cala Llenya beach in this popular destination in Ibiza
Slowdown in major cities with high housing demand
A general slowdown has been noted this summer in major cities, particularly Madrid and Barcelona, with year-on-year price rises at 2.1% - below the national average and lower than the rate of inflation.
Key metropolitan areas have been dubbed 'high-tension housing markets' by Spanish authorities, given that demand far outstrips supply, leading to rocketing rent and to homebuying prices being considerably higher than elsewhere in the country.
Despite being among the most expensive in Spain, though, homes in Madrid and Barcelona are still well below their peak: Inner-city properties remain 13% lower in price than during the height of the housing boom, and those in the wider metropolitan zones, 20% lower, TINSA reports.
Generally, home value increases are roughly in line with inflation, reveals the surveyors' association.
This has been hovering between 3% and 3.5% for the past 10 months, but fell to 2.8% in July 2024 – the lowest since early 2022, when the conflict in Ukraine pushed inflation rates worldwide up sharply and forced central banks to raise interest by unprecedented levels.
Euribor hikes have 'limited effect on home sales'
Interest rate hikes remain somewhat prohibitive, TINSA admits, but this does not seem to be hugely affecting demand for residential property.
Mortgages for homebuying are 'more accessible' than when the Eurozone interest rate, or Euribor, first soared just over two years ago, according to TINSA, and the 'strength of the employment situation' and 'overall consumer confidence' mean home loans are not seen as so much of a risk, even with much more of the monthly mortgage quota being swallowed up by interest rather than capital repayment – especially as consumers are feeling fairly secure that the Euribor is more likely to either remain at a similar level or to reduce in the future than to rise significantly.
Homes still selling: Third-best post-recession results
TINSA's verdict is borne out by the National Statistics Institute (INE), which finds that the number of home sales has not seen any major negative impact as a result of Euribor hikes or increasing property prices.
The first half of 2024 saw just under 300,000 residential properties sold – the total figure as at the end of June was 299,223 – which represented a fall of 4.5% year on year, but is, nevertheless, a positive result.
According to the INE, sales figures for the first two quarters of this year are the third-highest since the height of the property boom, beaten only by the same periods in 2022 and 2023.
