Spain’s property market has been steadily recovering since the global financial crisis of 2008, with 2022 being one of the most dynamic years for the sector. But how will rising energy costs, price-led inflation, and increasing Eurozone interest rates affect the outlook for 2023?
While the current economic climate has buyers and sellers concerned about the possibility of a downturn, the Spanish property market is expected to remain strong throughout 2023, with several positive trends continuing to drive growth and investment.
Here are the top seven trends predicted to shape the Spanish property market in 2023.
1. Investors will continue to see properties in key locations as a safe choice
From March 2021, following the COVID lockdowns, the Spanish real estate market already showed a significant rebound and continues to be seen as a solid bet for real estate investments as we move into 2023.
Living in such turbulent economic times, buying property in key locations in Spain will remain a safe investment option throughout 2023. These locations include the Costa Blanca, Costa Cálida, and Costa del Sol – particularly attractive for investors interested in rental properties as the tourist season in these popular holiday destinations spreads over (at least) 10 months of the year.
Whether looking to relocate, buy a holiday home or purchase a rental investment, properties in key areas in Spain are predicted to continue attracting investors in 2023.
2. Figures for sales will be slightly lower in 2023
ING bank predicts a ‘cooling down’ of the property-buying frenzy we experienced in 2022 and that the slowdown in sales will be more pronounced at the beginning of 2023 than in the months that follow.
Many property market experts predict a 12% reduction in buying and selling in 2023, partly due to the rise in the Euribor, or Eurozone interest rate, making borrowing more expensive.
The Investment Strategy report Analysis and Markets also predicts a slight decrease in home sales in 2023 – assuring that property sales will ‘continue to be high’, just not as high as we encountered in 2022.
Typically, overseas’ buyers in areas such as the Costa Blanca and Costa Cálida don’t need financing or will have already secured borrowing from their country of origin, which should mean sales in these areas are less affected by the economic downturn.
3. A chance that house prices will see a slight reduction
The price of properties on the Mediterranean coast – indeed, across most of Spain – has experienced a sharp increase over the last few years. However, the consensus is that house prices across Spain will not continue rising at the same rate in 2023, mainly due to the ongoing economic uncertainty.
While buyer demand is expected to remain more or less stable, potential buyers are likely to postpone their purchasing decisions until the turbulence around the cost of living crisis, inflation, and high-interest rates (raising the cost of borrowing) has settled.
As real estate has an extremely low liquidity compared to, for example, the stock market, it can take time for a falling market to lead to lower house prices, so it may take some months before we see sellers forced to lower their asking prices in order to sell. The longer the recession or rate hike cycle lasts, the more likely this is to happen.
Experts are predicting slight price drops of 1–3% in house prices throughout 2023, with prices remaining competitive compared to other international markets.
There could be some great bargains to be snapped up in the coming months!
It’s important to note that this trend is unlikely to apply to new builds, which have seen a 10% increase in production costs over the last two years. More expensive construction – due to higher labour and materials costs – has resulted in an increase in price for most new developments throughout Spain and could possibly reduce their supply in the longer term.
4. Continued demand from overseas investors, mainly European
One of the biggest drivers that helped the Spanish real estate market recover in 2021-2022 was overseas’ buyers, including British, Irish, and US citizens. Demand from expats and other foreign buyers looking to purchase a home in Spain rose by 76% last year.
While this renewed enthusiasm to invest in a property in Spain is likely to ease off a little in 2023 – again, due to the economic crisis – it’s highly doubtful it’ll be enough to turn it into a poor investment opportunity.
With 90% of foreigners being cash buyers, the increase in mortgage rates in Spain will not affect them. For the other 10%, mortgage rates in Spain still remain relatively cheap compared to inflation.
Overseas investors will continue to view Spain as one of the best countries in the world for relocating with children, working remotely, buying a holiday home, or investing in a rental property in 2023.
This being said, it’s still going to be vital that foreign buyers do their due diligence to identify issues and hidden costs when navigating the Spanish real estate processes. Teaming up with an experienced, professional estate agent, like Micasamo, will mean essential knowledge and support is available through an end-to-end service – including free consultations with legal, financial, and residency advisors.
5. Buy-to-let will continue to provide a good return for investors
The rental market in Spain is expected to continue growing steadily in 2023, presenting fantastic opportunities for those looking to invest in buy-to-let properties, especially in popular tourist areas like the Costa Blanca, Costa del Sol, and Costa Cálida.
With such a wide range of rental properties to choose from – including apartments, townhouses, and villas – the buy-to-let market in Spain will continue to be a great investment opportunity for those looking to tap into the growing rental market.
By purchasing a buy-to-let property in 2023, investors will have a long-term recurring source of income that offers a much higher return than many other investment sources at this time.
6. Growing interest in sustainable properties
With the sharp increase in environmental awareness that followed the pandemic, it’s predicted that the demand for properties with sustainable features will continue to rise in 2023.
More buyers than ever are looking for properties with features that can help to reduce their environmental impact (and lower their utility bills!), including solar panels, eco-friendly materials, energy-efficient appliances, and low-flow toilets!
The Spanish property market offers a wide range of suitable properties for those interested in sustainable living in 2023, making it a great investment opportunity for buyers looking to minimize their home’s impact on the planet.
7. The Spanish economy should remain more robust than many EU countries
According to the European Investor Intentions Survey 2023 report, prepared by CBRE, Spain currently ranks fourth among the countries providing the highest capital growth.
As one of the top-growing countries in Europe – with one of the strongest real estate markets in Europe – Spain looks set to maintain its competitive edge over many other EU countries throughout 2023.
The Bank of Spain predicts a return of 10% for the Spanish real estate market in 2023.
If you’re looking to invest in the Spanish property market in 2023
Whether you’re looking to purchase a holiday home, invest in a rental property, or relocate to a new home in Spain, 2023 looks set to be another successful year in Spanish real estate.
While there are obvious economic challenges to navigate, there are still endless opportunities for those looking to buy a property in Spain. Now could be an ideal time for you to take advantage of these top trends, grab a bargain, and secure your investment for the future.
If you’re ready to start the exciting adventure of looking for a property in Spain, get in touch with the team at Micasamo to guarantee an easy buying experience with full support throughout the process.
We provide a first-class end-to-end service and appreciate the need for trust and transparency, which is why we embrace video tours and verified testimonials to enhance the safety and security of your experience. For total peace of mind, we also offer free consultations with legal, financial, and residency advisors; relocation advice; and property consultancy to establish your right fit property.
