Real Estate Prices in Spain: Key Trends and Numbers

Key Trends of the Spanish Property Market

In most Western European countries, people tend to rent properties but not buy them. In Spain, the situation is the reverse. Rentals are popular predominantly among youngsters and seasonal visitors. Houses account for only 30% of all properties across the country while all the rest are apartments.

Below, we'll list the main trends that will be shaping the national real estate market in the next few years.

Moderate Growth Forecast

In 2023, real estate prices in Spain are affected by overall inflation, growing interest rates in the Eurozone and rising energy costs. These factors lead to the increased demand for rental properties, a modest rise in home values and a reduction in the number of purchase deals. In 2022, after the most severe phase of the coronavirus pandemic was over, the number of property purchase deals signed in this country grew by 7%. In 2023, it's expected to rise by only 1-2%. Most potential buyers will probably wait while keeping their eyes on the regional and global news.

Consumers Drove the Prices Up When Spending Their COVID Savings

During the pandemic, people spent less funds than usual because they couldn't travel and have fun freely. At the same time, they realized the importance of having a house or apartment with enough private space for each family member. Remote work became more widespread, which lead to the demand for housing where it's easy to arrange a home office. Many residents of Spain spent their savings on better apartments or private houses.

Barcelona and Madrid Are Becoming Less Attractive for Investors

The prices for accommodation in these two cities are sky-high. They seem unlikely to rise significantly in the future. The same can be said about the rent. Both Madrid and Barcelona lack free space for new construction. It makes sense to buy properties there only if you're planning to live there.

From the investor's position, the coastal areas would be the smartest option. Malaga attracts many expats and keeps developing rapidly. Valencia offers the same climate and level of hospitality as Barcelona but the prices there are much more affordable.

Expats Keep Investing in Spanish Real Estate

Most foreign buyers come from other EU states, primarily France and Germany. UK consumers after Brexit remain just as active — they only need to collect more papers.

Real Estate Market Will Keep Growing

Construction and tourism bring significant income to the national economy. Most probably, developers will keep creating numerous new residential areas in different regions of the country. Such areas will attract foreign investors without any doubt.

Prices Will Be Likely to Keep Rising

Because of high public debt, the government might implement extra taxes on banks. Consequently, mortgage interest rates can go up. The regional authorities might also increase selected taxes, which can be sensitive for foreign investors.

Level of Automation Will Increase

Thanks to online services, the process of finding the right property and purchasing it has already accelerated considerably. In the next few years, it will become even faster and the number of intermediaries involved will reduce. However, foreigners shouldn't discard the assistance of an experienced consultant. This professional will help you avoid excessive costs and make sure your deal is impeccable from a legal viewpoint.

Regions and Cities with the Most Affordable Real Estate

This table reveals the most affordable average cost of buying a property, sorted by region:

Here are the cities with the most affordable housing:

Regions and Cities with the Most Expensive Real Estate

Now, let's analyze property prices in Spain in the most premium locations. Let's start with the regions:

The real estate prices in the Balearic Islands have become prohibitively high for locals. That's why the authorities of this region are planning to prevent foreigners from buying houses and apartments there. Who knows, maybe, other regions that are highly popular among foreign investors will follow suit — so the sooner you make your buying decision, the greater your freedom of choice.

And here are the cities with the most expensive housing:

Regions and Cities with the Most Profitable Real Estate

When planning your investments, you probably want the annual price growth of the property to cover the increasing cost of owning it. In this case, consider the cities with the highest annual price growth rate:

And here are the most promising regions:

Mortgage for Foreigners

Mortgage loans are very popular among foreigners who decide to buy real estate in Spain. It's very easy to get one at a favorable rate if you're from the EU. Individuals from outside the EU tend to get smaller sums of money and pay higher rates — but still, they get their mortgages.

Here are the key numbers to remember:

• A typical fixed interest rate for a person who is not a Spanish resident is around 2-2.5%. Just to compare: for a local, it's around 1%.
• Variable-rate mortgages are not too popular now. They're calculated using the formula "Euribor + X%". In 2022, Euribor rose from 0% for the first time since 2015. There are no guarantees that it won't keep rising further. To play safe, it would be wiser to stick to a fixed rate.
• A bank would normally provide funds to a non-resident for no longer than 20 years. A resident can secure a loan for a longer term.
• A non-resident can expect to get no more than 60-70% of the property's value from the bank. For a resident, this number can be as high as 80%. If you'd like to buy a house or apartment from the bank's own listing, you might be able to get 100% of its full price as a loan. The banking institution might determine the price of the property at its own discretion. In this case, the percentage will be calculated not from the price that's indicated in your contract but a higher or a lower one.
• Spanish banks normally make sure that the client won't need to pay out over 30% of their monthly income as mortgage debt. The only exception is wealthy individuals who can afford to pay more. Besides, the banking institutions check whether the total amount of debts that the applicant is currently paying out doesn't exceed 15% of their annual income.

To apply for a mortgage, it's necessary to prepare the following set of papers:

• Passport or NIE
• Proof that you aren't a local resident
• Certificate of tax residence from your homeland
• Employment contract
• Payslips from your homeland
• Bank statement for the previous 12 months to confirm your salary level
• Tax return
• Contract for the property that you're planning to purchase
• Life insurance (only selected banks ask for it)
• Proofs of canceled outstanding debts (if you ever had them)

Don't forget to translate the papers into Spanish. Some banking institutions would ask you to provide the originals while others can accept scanned copies.

Retirees aged over 60 should provide a receipt of their pension and ask a family member to apply as a guarantor. If the latter becomes the co-owner of the purchased property, the foreign buyers should be able to enjoy tax benefits.

It's also possible for an expat to get a mortgage for a commercial property or a property that you'd like to build yourself — but we won't focus on them in this article.

Golden Visa

If you invest half a million euros in real estate in Spain, you'll become eligible for Golden Visa. You'll be allowed to apply for it if you tick the following boxes:

• Have been law-obedient
• Have enough funds to sustain yourself in the Mediterranean country
• Have a local health insurance
• Are not on the list of undesirable individuals or people who were rejected from any EU residency
• Have come of age

It doesn't matter whether you invest in one or several properties whose prices reach half a million euros in total. They can be either commercial or residential. You'll have the right to either use them for yourself or rent them out.

After you apply for Golden Visa, be ready to wait from 1 to 10 months for approval. After you get the approval, you'll need to renew this document in 5 years. In 5 more years, you can either renew it once again or apply for citizenship.

Investments in real estate aren't the only way of obtaining a Golden Visa. But it's the quickest, the most affordable and the most reliable method, compared to alternatives.

Rumors are circulating about the potential end of the Golden Visa program. So far, it remains relevant but it might be reasonable to hurry up to purchase your dream house or apartment.