The Spanish property market has been a topic of interest for many investors and homebuyers alike. In this blog post, we will analyze the current state of the Spanish property market and make predictions about its future trends.
According to a report by CBRE Spain 1, the Spanish economy has shown clear signs of easing so far in 2023. A combination of heightened inflationary pressures and monetary policy tightening will curb activity slightly, however, economic momentum should start to pick up once again as we move through the second half of the year. Despite this, forecasts suggest that GDP growth will reach 1.2% this year, outperforming the Eurozone average.
Quality, ESG credentials and flexibility in terms of uses will separate the best assets from the “rest”, giving rise to an ever more apparent polarisation across most sectors. Forecasts suggest 2023 will see a downward adjustment of around 20-30% in investment volumes, particularly during the first half of the year, with growth expected to resume during the second half. Monetary policy tightening put a strain on the market in 2022, with sovereign bonds experiencing significant upticks and prime yields also seeing direct increases. Forecasts suggest that the majority of asset classes have already experienced more than 70% of the maximum adjustment expected, with yields still expected to continue to climb over the course of 2023, but at a more moderate rate.
Market polarisation is set to become more pronounced throughout 2023. There will be increasingly greater disparity between assets that do not hold a lot of appeal – whether it be due to their location, design or the level of technology they offer – and properties built with a clear purpose in mind, designed to offer a functional asset or create a connection with people. The difficult macroeconomic backdrop will squeeze office take-up forecasts which, while remaining positive for this market, will see increases limited to 5-10% compared to the previous year.
While logistics demand hit an all-time record in 2022, this year we expect take-up to dip by 20% in Catalonia and 30% in the Central Area due to the mismatch between quality supply and robust demand. Sales and footfall figures recovered across almost all retail segments in 2022, coming close to reaching pre-pandemic levels. Spain is expected to see retail sales continue to trend upwards in 2023, rising by 4.5% and outpacing the average growth rate for the Eurozone.
The investment outlook for the living sector paints a promising picture for 2023, with the less traditional segments (student housing, flex living and senior living) set to continue to thrive – in light of the quality of life and flexibility that they offer – accounting for an increasingly larger investment share compared to rental housing, particularly BTR projects which are currently the main investment target in this segment.
According to a report by Think.ing 2, a downturn is expected in the Spanish property market due to the rise in interest rates and tighter credit conditions, which could cause property prices to stagnate this year. However, a crash like the one seen during the financial crisis seems unlikely. The market is still expected to outperform the eurozone average thanks to robust demand.
In conclusion, the Spanish property market is expected to experience a slight slowdown in 2023, but it is still expected to outperform the eurozone average. Investors and homebuyers should keep an eye on the market trends and make informed decisions based on expert opinions and forecasts.
