However, the Spanish bank is not so optimistic for 2024, anticipating a 2.1% drop in house prices, according to idealista.

The study highlights that the number of home sales fell 9% year-on-year in the four quarters accumulated up to the 1st quarter of 2023, with a greater decrease in existing homes (-10.9%) compared to new construction (+0.1%).

“Although sales have fallen compared to the record levels recorded in 2022 they are still 3% higher than those of 2019. However, if we look exclusively at the numbers for the 1st quarter of 2023, sales in that period fell 20.8% compared to the same period in 2022, with declines in both existing and new homes (-23. 4% and -8.3%, respectively)”, the study also reads.

The supply of houses also “remains limited to meet housing needs, taking into account demographic trends”, and suffers from the impact of “high construction costs”, highlights the document.

Price drop

The Spanish bank recalls that there is a natural “time lag between the action of monetary policy and its impact on the economy”, and that in the case of the real estate market this impact happens in two ways.

“On the one hand, the higher cost of financing disincentivises a portion of potential buyers with less ability to access credit, which leads them to necessarily look for cheaper homes. On the other hand, the updating of indexes for variable rate loans occurs gradually over time, so that the effort perceived by borrowers (as well as a potential decision to sell) is also gradual”, adding that the second half of the year will be important to assess the impact of rising interest rates on the market.

CaixaBank has no doubt that “resilience in demand, the scarcity of new homes and high construction costs will continue to support house prices, even in a context of sharp rises in interest rates”. However, the outlook is “not so optimistic” for 2024.

The study points to a 2.1% drop in house prices. “One of the main factors behind this forecast is related to the strong slowdown in demand. This year, we expect the number of sales to be more than 20% below the 2022 number and for this low level to persist into 2024. Double-digit declines in demand over prolonged periods of time are compatible with price reductions, as we have seen elsewhere markets in developed countries”, he explains.

Despite this, the Spanish bank speaks of a “more moderate reduction”, and considers a significant correction in prices like that of 2011-2013 to be “unlikely”, “when the country received financial aid and household debt was greater”.