Interest rates have slightly decreased, rental and housing prices continue to rise, there is a strong demand for apartments and a shortage of supply affecting rentals. These are some of the elements affecting the residential real estate market in 2024. In this article, we go into detail to analyze all the important aspects and emerging trends.
Access to housing is a significant challenge in the Spanish real estate market, especially for young people, lower-income households, or those located in certain geographical areas. The housing crisis has been a persistent problem in Spain over the past decade, and although there have been some advances, the market continues to face significant challenges.
A gradual reduction in interest rates is expected to increase the purchasing power of families, but according to experts, the decreases may not arrive until the end of the year or next year.
Influence of the economic and social context on the residential real estate market
The economic context is still uncertain in Spain and, therefore, there are elements that are affecting the real estate market such as the following:
- Reduction in mortgage contracting. According to the latest INE data published in July 2024, the number of mortgages on homes registered in property records in May was down 18.2% year-on-year.
- High interest rates. The average interest rate on mortgages, according to the INE, stands at 3.25%. Many buyers are waiting for rates to drop, but they are not expected to do so in the short term.
- Purchasing power. The purchasing power of Spanish families is lower than the European average. The European Commission considers that this year the real wages of Spaniards, discounting inflation, will increase by 0.5%, compared to 1.5% in the eurozone.
- Access to housing. The ability to access housing, for sale or rent, remains a critical issue. New regulations, such as the Housing Law, have attempted to address the problem, but demand continues to outstrip supply in many urban areas.
- Geographic inequality. There are significant differences between different regions of Spain. While cities like Madrid and Barcelona are experiencing a real estate boom, other regions are seeing lower demand and more stagnant prices.
What is the situation of the housing market?
The notarial statistics published in July 2024 show several interesting data regarding home sales:
- Home sales increase in thirteen autonomous communities.
- The price per square meter increases by 1.3% annually. Notable increases are seen in Galicia and Cantabria.
- The number of sales increased by 3% year-on-year.
- By type of housing, apartment sales increased by 2.9% year-on-year, and single-family homes by 3.2% year-on-year.
Regarding new housing, according to the New Housing Market Trends Report prepared by the Valuation Society, the average price of new housing has reached 2,930 euros per square meter and has increased by 4.35% compared to the previous year.
How has the rental housing market performed in 2024?
In the rental market, there is an evident problem affecting supply and demand and, consequently, prices.
The demand for rentals continues to increase, driven by the need for flexibility and accessibility. Many people, especially young professionals and expatriates, prefer to rent due to job mobility and economic uncertainty.
The supply of rental apartments fails to meet the demand, especially in large cities like Madrid and Barcelona, where the shortage of rental housing has led to rising prices. Additionally, many owners have shifted their properties to the vacation rental market to achieve higher returns.
According to the idealista.com report, the price in Spain increased by 13.2% from July 2023 to July 2024. In highly stressed markets like Valencia, Madrid, Palma, or Barcelona, the year-on-year increase reaches 20%.
When analyzing provincial capitals, Valencia and Cáceres are the ones with the highest price increase at 19%.
Residential real estate market trends in 2024
The real estate market in 2024 is changing and several trends are detected that will likely continue next year. These are some of the most notable:
- Digitalization. The use of advanced technologies such as artificial intelligence is revolutionizing the real estate sector. These technologies enable better property management, predictive market analysis, and personalized experiences for buyers and tenants. According to the Real Estate Market Trends in Europe 2024 report by PWC, 95% of respondents believe that marketing and rentals will be the two main areas of AI application.
- Sustainability. Sustainability has become a key factor, and eco-friendly constructions are in demand by buyers who are even willing to pay more for environmentally friendly homes. According to PWC’s report, by 2025, sustainability will be the trend with the greatest impact on the real estate industry.
- Demographic changes. In Spain, there is a factor influencing the real estate market: the aging population. This means that demand will shift towards senior residences or clinics.
- Return to rural areas. The possibility of remote work or flexible jobs is shifting the demand for sales and rentals to areas further from cities and urban environments.
- New forms of housing. For some time, other forms of housing have been gaining traction in the real estate sector. We are talking about Coliving and Flex Living. Coliving offers an affordable solution for young professionals who work remotely and want a cheaper housing solution, while Flex Living provides flexibility for those who need temporary housing options because they frequently move from one place to another.
- Student residences. The student residence sector has remained attractive to investors. The demand for quality accommodations for university students will continue to grow, driven by the expansion of universities, the creation of new centers, and the increase in the number of international students.
The residential real estate market in Spain in 2024 shows a combination of challenges and opportunities. All industry players must be attentive to changes and take advantage of them. It is necessary to see what will happen with interest rates which, when they drop, will make financing cheaper and, therefore, boost home purchases; and to rental market regulations, to verify if they manage to solve the major problem of supply shortage versus high demand.
If you want to invest in housing, sell your apartment, or enter the rental market as a landlord or tenant, contact the team of experts in the real estate sector at PRODDIGIA and we will help you achieve your goals.
