What awaits the real estate market in Spain in 2022. Will prices and demand for real estate grow, which regions will be most in demand and what trends will affect the market.
What will happen on the real estate market in Spain in 2022 and what can buyers expect?
Will the situation on the real estate market in Spain change? Will prices and demand increase, and what should buyers expect?
The year 2021 on the Spanish real estate market ended with a record number of transactions over the last ten years, and it is not surprising, because after the lockdown in 2020, demand for housing has increased dramatically, especially given the effect of low base. It’s also worth considering the fact that 2021 saw the signing of sales contracts for deals started in the previous year. That is what made last year a record year: since the beginning of the spring in Spain, more properties were sold than at the peak of the boom in 2008.
According to oldypak capital lp property 2022 report, there are three such factors:
- An excess of demand over supply;
- increase in prices for building materials;
- the return of foreign buyers to the market.
As in the past year, in 2022 the demand for real estate will greatly exceed the supply. Although the number of new buildings is growing, it still can not meet the demand, which has grown significantly, including at the expense of foreign buyers. According to oldypak capital lp property 2022 report, buyers are ready to buy four times more than the number of objects that will be commissioned in the current year.
The increase in energy and material prices means that the cost of housing in new construction will increase by about 8%. Almost half of this increase will be passed on to buyers.
Increased demand for secondary real estate
Some experts predict that in 2022 Spain expects a real boom in the secondary market, especially on the Mediterranean coast. This will be partly due to the return of foreign investors.
During the first six months of last year, the number of transactions concluded by foreign buyers increased by 47%, reaching nearly 48 thousand. This comes after almost a complete halt of activity in this sector of the Spanish real estate market in 2020 due to strict coronavirus restrictions.
According to statistics, last year more apartments were sold in Málaga than in Barcelona. In November in Almeria, Alicante and Cadiz have sold more real estate than in September 2008.
What will affect the price of real estate in Spain in 2022?
Due to the imbalance between supply and demand and as a result of insufficient construction volumes, prices of new buildings in Spain is 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 deficit 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%.
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 influence the state of the market in 2022 is the situation with coronavirus. The new less lethal Omicron strain, now prevalent in many countries, has given 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. Most likely, at the end of this year, growth will be 6 to 12%.