What can we expect from housing prices in 2024?
2024 started with good news for the real estate market. A cycle of 13 consecutive months of declines in home sales in Spain came to an end. According to the National Statistics Institute (INE), a total of 52,796 transactions were completed in February, 5.8% more than in the same month in 2023, and 1.6% more in the year-to-date.
In 2023, a year marked by rising interest rates, housing prices increased by an average of 4%. This increase was, however, more moderate than the previous year, when it recorded a 7.4% rise, the largest advance since 2007. The data from the entity confirm the trend in the first quarter of the year, showing an annual growth of 6.3%. By type of housing, new homes increased by 10.1%, while second-hand homes increased by 5.7%. In both cases, the rise is more than two points compared to the previous quarter.
The 2023 Annual Report on Real Estate Statistics prepared by the College of Registrars puts the average housing price at €1,963/m². New housing is priced at €2,161/m² and second-hand housing at €1,917/m².
Mortgage war
The outlook for the coming months will continue to be strongly influenced by the evolution of inflation, interest rates, and the overall economic situation. Recently, the European Central Bank confirmed its forecasts and announced a long-awaited cut in interest rates to 4.25%, a development not seen since 2016. Christine Lagarde, the president of the ECB, was cautious and made it clear that this reduction did not represent a commitment for the future. However, the decision has a direct effect on lowering mortgage interest rates, with uncertainty about whether it will lead to a recovery in mortgage credit beyond that.
Carlos Cuerpo, Minister of Economy, Trade, and Business, stated that families renewing their mortgages in the coming months could save up to €400 per year. This reduction is accompanied by the stability of the Euribor over the past twelve months and a drop in inflation, which has had a positive impact on household savings. In parallel, a “mortgage war” has been declared between banks, resulting in a reduction in interest rates, from 3.94% in October 2023 to 3.68% in February 2024, according to the latest data from the Bank of Spain. The decline has been particularly reflected in fixed-rate mortgages, where HelpMycash estimates the average reduction has been €500.
Housing prices in 2024, from less to more
In this context, experts are conservative about the evolution of the housing market, though they establish differences over time. CaixaBank Research predicts a moderate drop in home sales and a price increase of less than 3%, before experiencing a rebound: “the real estate sector will go from less to more this year and return to the expansion phase in 2025.” BBVA, on the other hand, expects increases in 2024 but notes that “this increase could reach 3% in nominal terms, but in real terms, discounting inflation, it represents a decline of about 0.6%.”
Less optimistic are the forecasts from Bankinter, which estimates that housing prices will drop by 2% in 2024 but will rise again in 2025 with increases of 1%.
Globally, consultancy PwC and the Urban Land Institute (ULI) postpone the sector’s improvement until next year. This is the conclusion of their report ‘Emerging real estate trends global perspectives‘, which indicates that uncertainties remain despite the moderation of inflation and the reduction in interest rates.