PROPERTY SEARCH

Date Published: 26/01/2023

House prices in Spain will see one of the biggest drops in Europe this year

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The cost of homes should continue to fall in Spain until the beginning of 2025

House prices in Spain will see one of the biggest drops in Europe this year

Spain’s property market experienced a strong post-pandemic rebound during 2022 despite continuously rising interest rates, which increased at an average of 10% per year. Demand far outstripped supply but rather than predicting a market collapse, the experts are confident that Spain will be one of the countries where house prices will fall the most in 2023 and 2024.

This natural correction in the market after the interest rate hikes should see property prices plummet, according to S&P Global Ratings, with Portugal (-4.4%), the UK (-3.3%), Spain and the Netherlands (-2.5%) likely to experience the most dramatic decreases.

On the other hand, while homes will drop by another 1% in 2024 a slight upswing of 1.5% should occur by 2025 as the market recovers once more.

But, according to Sylvain Broyer of S&P Global Ratings, there is "little or no prospect of a strong rebound until 2025."

"We have found that the adjustment to higher interest rates can last up to ten quarters and is typically twice as pronounced as after a low interest rate regime," Broyer said, explaining that house prices across Europe will undoubtedly be affected by rising interest rates.

Mortgage rates are currently at their highest figure in more than a decade with little sign of a slow-down. In fact, S&P now believes that the European Central Bank (ECB) will increase rates to 3% this year, rather than the 2.5% they predicted at the end of 2022.

Unfortunately, there is no sign of these charges being reduced anytime soon, which will naturally hike up the cost of mortgages from 2025.

However, when general inflation is considered and mortgage interest rates are looked at in terms of other rising costs, the increase is actually nominal, and looks set to remain this way for the next couple of years.

Coupled with this is the fact that unemployment is at an all-time low throughout Europe, and most countries, including Spain, have implemented substantial wage increases, meaning that home owners now have more purchasing power than ever before.

Now read: Foreign buyers snap up half the homes in the Canary Islands

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