Spain, with its millennia-old history and diverse attractions from vibrant cities to serene coastlines, has solidified its status as the world’s second most popular tourist destination. In 2023, Spain welcomed over 85 million international visitors, an increase of 13 million from the previous year, according to the UN WTO. This influx has significantly bolstered the nation’s economy, as tourism currently accounts for around 12% of Spain’s GDP.

The overall performance of the Spanish economy in 2023 has exceeded expectations, with a 2.5% GDP growth, far outstripping the forecasted 1.0% at the close of 2022. This economic vitality is mirrored in the labour market, where employment rose by 783,000 jobs, and the unemployment rate dropped by 1.1% to 11.8% in Q4 2023, down from 12.9% at the end of 2022.

These positive economic trends, alongside Spain’s growing international allure, are fuelling a supportive environment for the residential property market nationwide.

SPANISH RESIDENTIAL MARKET

The Spanish real estate market showed resilience in 2023 despite global economic challenges. The sector was bolstered by a strong labour market, significant immigration, a mismatch between high demand and limited supply of new housing, and improved household finances. Stabilised construction costs led to a consistent number of new home construction permits compared to previous years, however, they were well below market needs.

Housing sales remained robust, with over 700,000 units sold in 2022 and around 640,000 in 2023, largely dominated by transactions of existing homes due to a significant stockpile from previous decades and a shortage of new constructions.

International buyers also played a significant role, peaking at a record 134,000 purchases in 2022. This figure dropped to 123,000 in 2023. Moreover, fewer buyers used mortgages in the higher interest rate environment, with only 45% of transactions requiring new loans in 2023, down from 55% in 2021 and 60% in 2007.

Recently, Spain joined Portugal and Ireland in eliminating the real estate investment route for their “golden visas”. The Spanish government announced plans to phase out these visas, introduced in 2013 to stimulate real estate investment by granting residency rights to those who invested at least €500,000 in property. The move follows political pressures due to rising housing costs and aims to curb the soaring real estate prices.

Spain faces a housing shortage, with residential investment at 5.7% of GDP in 2023, below the eurozone average and historical national levels. Housing construction permits in 2023 were well below past averages, contributing to a shortage of 325,000 homes, which is expected to grow in coming years. Nominal house prices have risen 56% since 2014, though still 2% below their 2007 peak, and rental prices have increased by 7–8% annually from 2015 to 2022.

The rental market has expanded since the 2008 economic crisis; 3.6 million primary residences were rented in 2023, up from 2.3 million in 2007. This market primarily serves lower-income households, young people, and foreign nationals, with private landlords dominating and a notable lack of social housing rentals. Despite a high homeownership rate of 75% in 2022, higher than the EU average, the rental market continues to grow.

SPANISH WORLD CITIES

Spain’s strong residential market has performed well in a global context, especially the prime market. European and Middle Eastern cities saw the highest capital value growth in the Savills World Cities Prime Residential index, driven by undersupplied markets unable to meet the soaring demand from international buyers. Lisbon topped the list at 4.2% prime price growth, with fellow Iberian cities of Madrid and Barcelona seeing capital value growth of 3.5% and 2.7%, respectively, over the first half of 2024.

Whilst the Spanish market has seen strong price and rental growth over recent years, it still remains competitively priced by global standards. The prime markets of Madrid and Barcelona offer the greatest European value across the 30 cities in the index, only beaten by Kuala Lumpur and Cape Town in terms of lowest prices per square metre. However, it should be noted that prime prices can exceed the averages quoted in the World Cities analysis for Madrid and Barcelona. For new build and trophy projects, prices can reach €20,000 per square metre in Madrid and €13,000 per square metre in Barcelona.

_{Read the articles within Savills Spotlight on Spain report below}