House prices in Spain have been on the rise for years, as have interest rates, housing demand… and many more factors that make us wonder if it’s a good time to buy a home in 2024 , or if it’s better to wait for prices to stabilise. Is it better to wait another year or is 2024 the ideal time to buy a home? What do the experts say and what are the market signals? Join us as we break down all the factors you should consider.
Factors influencing the real estate market
The real estate market is influenced by a variety of economic and social factors. Interest rates and housing prices are two of the most crucial elements that need to be considered.
Interest rates
Interest rates have a direct impact on the cost of mortgages. When interest rates are low, mortgages are more affordable, which encourages more people to buy homes. Conversely, when interest rates rise, the cost of mortgage borrowing increases, which can discourage property purchases. Historically, interest rates have fluctuated in response to the European Central Bank’s monetary policy and global economic conditions.
Housing prices
Another factor that is equally or more important than interest rates is the price of housing, which is determined by the interaction between supply and demand in the real estate market. In recent years, we have seen an increase in housing prices, largely driven by high demand (due mostly to both domestic buyers and foreign buyers) and limited supply. Prices can be influenced by a number of factors, such as population growth, urban development, interest rates, the local economy, consumer confidence, and many other factors.
Other factors
In addition to interest rates and housing prices, other factors also influence the real estate market:
- Government Policies: Regulations and tax policies can significantly affect the real estate market. Tax incentives for home buyers, construction subsidies, and zoning policies are examples of how the government can influence the market.
- Overall Economy: The overall economic health of a country, including employment and wages, directly affects people’s ability to purchase homes. A strong economy usually means a robust housing market.
- Demographics: Changes in demographics, such as population ageing or migration, can influence demand for different types of housing.
Current housing situation in Spain in 2024
To understand the current situation of the real estate market in Spain, it is essential to review the evolution of housing prices, the volume of sales in recent years and the state of supply and demand.
Evolution of housing prices
In the last year, the average price per square metre in Spain has increased by 6.8%, reaching 2,100 euros per square metre, according to data from Idealista . This increase is part of an upward trend that has remained constant over the last five years. Since 2019, prices have risen by 22%, from 1,700 euros per square metre to the current 2,100 euros. These levels have reached the all-time high recorded in 2007, when prices exceeded 2,100 euros per square metre. Unlike in 2007, the current price increase does not seem to be part of a real estate bubble, but is driven by a combination of high demand and limited supply.
Volume of purchases and sales
The volume of home sales has shown a growth trend since 2013, reaching levels comparable to those of 2007 in 2022. However, in 2023 a decline in transactions has been observed, returning to figures similar to those of 2018. This decline is largely attributed to the rise in interest rates, which has made mortgages more expensive and discouraged some potential buyers.
Status of the offer
Housing supply in Spain has seen declines over the past four years. According to the Bank of Spain, the volume of supply is at levels similar to those in 2016, when demand was significantly lower. In addition, new construction permits fell by 1% in 2023, and the pace of new housing construction remains at around 100,000 units per year, well below the more than 300,000 per year recorded in the 1990s. According to estimates by Atlas RE Analytics and Gesvalt, Spain would need to build one million affordable homes to meet current demand.
Housing demand
On the other hand, housing demand remains robust, driven by factors such as population growth and urbanisation. High rental demand also supports home buying as a profitable investment. Despite the recent drop in sales, structural demand for housing remains strong, which continues to put upward pressure on prices.
Interest rates
As for interest rates, they have seen a significant increase in recent years due to the policies of the European Central Bank (ECB) to combat inflation. In 2023, the ECB raised the reference interest rates, bringing the Euribor, the index to which most mortgages in Spain are referenced, to levels above 3%. However, forecasts indicate that these rates could stabilise or even start to decrease from 2024, offering a respite to home buyers.
What is expected
According to reports from entities such as Bankinter and CaixaBank Research, house prices in Spain are expected to continue their upward trend in 2024, although at a more moderate pace compared to previous years. Bankinter estimates house price growth of around 3% for 2024, influenced by factors such as a strong labour market, a shortage of supply in major cities and a moderate reduction in interest rates. In addition, interest rates could begin to fall from mid-2024.
Tips to know if you should buy a home in 2024 or 2025
Evaluate your personal financial situation
Before making any decisions, it is crucial to evaluate your personal financial situation. Make sure you have a clear and realistic budget for the home purchase. Consider all associated costs, including closing costs, taxes, and maintenance.
Get mortgage pre-approval
An important step is to get a mortgage pre-approval. Not only will this give you a clear idea of how much you can borrow, but it will also position you as a serious buyer to sellers.
Working with a real estate agent
Working with a trusted real estate agent can make a huge difference. A good agent will help you navigate the market, find properties that fit your needs, and negotiate the best possible terms.
Inspect the home thoroughly before purchasing
Finally, make sure to conduct a thorough home inspection before closing the purchase. A detailed inspection can reveal potential problems that could affect the value of the property and your long-term plans. As you can see, 2024 is shaping up to be a crucial year for the real estate market in Spain, with prices on a moderate rise and interest rates likely to fall. If you are considering buying a home, carefully assess your financial situation and follow expert advice to make the best decision. At 1mast, we are here to advise you and help you find the perfect home in Malaga. Contact us today for more information and personalized advice.
