The Spanish property market in 2022
A few more days and 2021 will be over. What a year it was for the property market. The first few months were difficult, but from the summer onwards, recovery set in. Helped by intensive vaccination programmes and the lifting of travel restrictions. Foreign buyers returned to the Costa Blanca. There seemed to be a post-Covid boom. At least in the region where Orange Villas Moraira operates. Before the buyers had the upper hand. But in the second half of the year sellers could decide what was going to happen. In the third quarter, the number of sales rose sharply. Demand exceeded supply. In the price bracket of EUR 300 to 500,000, there was (and is) scarcity in the supply of houses. There was (and is) also a scarcity of luxury villas with sea view up to 1 million. The supply of good plots with sea view is also limited. But what direction will the property market take in 2022?
Until recently, we could write a clear story about this. Internet is full of publications on how the Spanish housing market will develop in 2022. But in 95% the discovery of the Omicron variant was not taken into account. In fact, they assumed a recovering Covid situation. So it is all a matter of guesswork. Let us first see what the expectations were for 2022 without Omicron.
2022 without Omicron
When we did not know about Omicron, the noises for 2022 were positive. Property prices were to remain stable or increase in the first two quarters of the new year. The expectation was that the Euribor would drop to 0.32%. This would make mortgage repayments cheaper. There were positive sounds about the Spanish economy. Households saved more, which increased the liquidity of buyers. This trend would continue in 2022.
House prices were already rising in 2021. Bankinter predicted a general price increase of 2% in 2022. Bankinter also assumed around 500,000 transactions. This is comparable to the peak year of 2007. Of those 500,000, 400,000 would be existing homes and 100,000 new homes.
New lifestyle ideas resulting from Covid would influence the look of the new build. Larger homes and a high level of finishing. Everything pointed to a strong Spanish property year. The demand for luxury villas also increased.
International property consultancy Knight Frank studies markets and capital worldwide. They concluded that Spain will be one of Europe´s biggest investment countries in 2022. Along with the UK, France, the Netherlands and Germany. They estimated an investment of 7500 million euros in the Spanish real estate sector. Spain is attractive for real estate investors because of its excellent returns. Besides, Spain showed a strong recovery after the pandemic. Logistics centres, data centres, houses and offices did particularly well.
The Spanish housing index stood at 1649.20 euro/m2 in the second quarter of 2021. In the third quarter this figure rose to 1661.60 euro/m2 and should be around 1715.00 euro/m2 by the end of this year. Analysts also foresaw an increase in the longer term. In 2022: 1728.00 euro/m2. And in 2023: 1746.00 euro/m2.
The cost of labour and building materials has increased worldwide. The Bank of Spain has warned that house prices will rise and that this trend will continue in 2022.
2022 with Omicron
There is no getting away from it. The Omicron variant has made its appearance and is spreading quickly. To what extent this will influence expectations is impossible to say at the moment. Two factors are important for the economy: politics and fear.
Political decisions like travel restrictions and vaccination obligations influence the real estate market.
Fear and uncertainty may lead to postponement or cancellation of buying / selling decisions.
What will be the effect on the property market if this bad scenario materializes. Who can predict that there will not be a strong post-Omicron boom? No one.
For the time being, we have not noticed any decline caused by the virus in our region. The demand for (new-build) homes is greater than the supply. Those who have not yet sold their homes can assume that the price is too high. As long as the borders remain open, we expect an excellent result in 2022.