Spanish house prices will fall an average of 16% nationwide, and rents by 18% in the next two years, as a result of the economic crisis triggered by the coronavirus, forecasts property market expert and economics professor Gonzalo Bernardos, who is regularly quoted in the Spanish press.
Bernardos publishes a regular report on the Spanish property market in conjunction with the real estate firm Forcadell, both of them based in Barcelona.
The latest report takes into account the impact of Covid-19 on the Spanish economy, with dire implications for property and rental markets all over Spain, but the darkest picture is reserved for tourist hotspots like Palma de Mallorca and Tenerife, where house prices are forecast to fall by up to 20%. Prices in popular holiday destinations like Valencia, Alicante, and Malaga are all forecast to decline by more than the national average of 16%
Bernardos, the report’s director, suggests that holiday-home destinations will be hit hardest as the tourist economy is brought to a virtual standstill by the global C19 pandemic. Cities with more diversified economies will fare better. In Madrid, for example, house prices are forecast to fall by no more than 13% in total by the end of next year. The forecast for Barcelona is -12%.
House prices will start to recover in 2020, assuming the virus is brought under control in 2021, argues the report.
Rental price decline
Between January of this year and December 2021 rental prices for new contracts are forecast to fall by 18% on average, and by more than that in Barcelona and Madrid, where the flood of short-term rental conversions to long-term will overwhelm the market as tenants struggle with lower incomes.
Thus-far sought-after areas in the city centre are forecast to fare the worst. Rental prices are forecast to decline the most in the Ciutat Vella Old Town of Barcelona, and Chamberi and Salamanca districts of Madrid.
The report also forecasts a blood-bath in the commercial real estate market, with vacancy rates exploding, rental incomes collapsing, and an absence of new demand coming through to plug the gap.