The bank’s research department expects Spanish house prices to retreat in the face of rising inflation and borrowing costs, much like most other developed-world housing markets with the exception of the USA.
As you can see from the chart above showing the evolution of Spanish house prices over the last five years using data from the notaries based on sales witnessed by them, prices dipped in 2020 because of the pandemic but recovered strongly from the second quarter of 2021 until Q3 this year, when growth fell to zero.
The chart above suggests that Spanish house prices have rapidly lost momentum in the last two quarters, and look like entering negative territory in Q4, and going into next year on the decline.
Bankiner forecast that Spanish house prices will fall 3% in 2023 and 2% in 2024, a total fall of 5% in the next two years before starting to recover in 2025.
The analysts at Bankinter attribute some of the blame for this to Putin’s invasion of Ukraine, which has helped to drive up inflation, and therefore interest rates. “With all this in play, the probability that this matter is resolved in the short term and stops feeding inflation is very small,” says the latest market report from Bankinter. The European Central Bank has been raising interest rates to fight inflation, which has driven up Euribor and therefore mortgage borrowing costs.
However, the bank goes to some length to emphasise they expect a modest change in the trend towards negative house price growth in the next two years, rather than a severe adjustment.
Meanwhile, the latest quarterly survey of estate agent business sentiment by the property portal Idealista.com shows that estate agents also expect house prices to start falling along with a slowdown in sales, though they are more optimistic about getting new listings, which has been a big problem this year for most agents working in popular areas.
As you can see from the charts on this page, the house price trend is heading down, the sales trend is heading down, and borrowing costs are on the way up.
Bankinter are probably right to forecast falling prices next year for the national average, but some local market segments will buck the trend.