0.3% Decrease in Housing Prices in Spain

In the report provided by S&P Global Ratings on European housing markets, it is highlighted that a 0.3% decrease in housing prices is anticipated in Spain during the year 2024. This projection marks a shift from the upward trend that has prevailed in previous years, foreseeing a return to increases in 2025 and 2026, with increments of 1.5% and 2%, respectively.

The report emphasizes that, according to S&P, housing prices in Europe showed greater resilience than initially expected in 2023. This unexpected resilience led to upward revisions in forecasts for the real estate market, with more notable variations in the United Kingdom, Ireland, and southwestern European countries, such as Spain and Portugal.

The credit rating agency attributes these forecasts to a demand that has shown less weakness than expected in the last two quarters of 2023, coupled with limited supply, identified as the “primary factor” contributing to maintaining prices.

Regarding demand, it is highlighted that the European labor market has resisted more robustly than anticipated, generating 600,000 net jobs in the second and third quarters of 2023, with a continuous wage increase. Additionally, various European governments have intensified their financial support to households, contributing significantly to the annual increase in gross disposable income of households in the eurozone.

On the other hand, supply has become the main factor resisting housing prices in Europe, attributed to material shortages, a sharp shortage of labor, and the fact that raw materials such as construction, cement, bricks, or manufactured windows have not experienced reductions from their peak levels. All this has led to an “increase in construction costs in a labor-intensive sector.”

S&P argues that new housing prices are more directly affected by construction costs and less by interest rate variations, especially in markets with a higher proportion of newly built homes.

Regarding the decrease in interest rates, it is mentioned that it is not expected to happen until mid-year, according to the interpretation of real estate fund outflows until November, suggesting that investors do not believe that real estate prices have reached their lowest point. S&P Global Ratings anticipates that central banks will postpone the cut in official interest rates until mid-year, in contrast to market expectations suggesting a cut in early spring.

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Reference article: idealista.com