Fitch questions sustainability of rising house prices in Madrid and Barcelona

property for sale in madrid
Madrid is a foreign investment hotspot, along with Barcelona (up until now)

The ratings agency Fitch warns of “huge price hikes in Madrid and Barcelona that don’t appear sustainable”. Districts in central Barcelona has seen year-on-year price rises of 35% while in Madrid, they’ve gone up by 15%. The agency attributes strong demand and limited supply as the main reasons for the increases.

Fitch confirms that the return to normality in the Spanish property market is taking place at two speeds. In the centre of the largest cities such as Madrid and Barcelona, strong demand together with limited supply is driving “price rises that don’t appear sustainable”.

According to the agency, the most sought-after districts in Barcelona such as Eixample and Ciutat Vella saw year-on-year price increases of 35% in September. In Madrid, prices in the centre have gone up by over 15% in the last year.

“Strong demand is being driven by the European Central Bank’s policy of low interest rates, the presence of foreign investors and a rise in rental rates,” highlights the Fitch report. The agency does not forecast similar conditions for the Spanish property market as a whole in the short term.

The Fitch report was prepared before the constitutional crisis in Catalonia, so does not take into account any impact this may be having on the housing market in the region.

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