It’s been a while since our last newsletter, so we take this opportunity to provide you with a summary of the latest available statistics for the Spanish mortgage market, our view on these and the market in general.
Against a background of high inflation, increasing interest rates and rising geopolitical tensions, it’s not surprising that the Spanish property market slowed down during 2022 and 2023, with around 17% less homes purchased in August 2023 compared to a year earlier.
According to the latest report from the INE (Instituto Nacional Estadística), the number of home mortgages signed in Spain was 28,344 in August 2023, which represented a 22.7% decrease on the year before and a 3% decrease on the previous month.
There were some notable regional differences, with the Canary Islands (11.8%) and Murcia (4%) both recording an increase in the number of signed mortgages. The regions where most mortgages are signed, Catalunya -27.8%), Madrid (-31.4%), Andalucia (-19.5%) and Valencia (-30.6%) all recorded significant falls.
According to the College of Registrars, nearly 90,000 Spanish homes were sold to foreigner buyers in 2022, 46% more than in 2021, although this only accounted for 13.8% of the total properties sold. The statistics indicate that 2023 will show a further increase in homes sold to foreigners and, in general, it is accepted that demand for housing by foreigners has been growing for more than a decade with the Covid pandemic proving to be just a blip.
The average interest rate in August 2023 was 3.25%, for the whole market, which includes both the national and foreign markets. According to our own experience, we believe that the average rate for foreign buyers would be somewhere between 0.5% and 1% higher than the overall average rate, so 3.75% – 4.25%. Since August it may have risen slightly again, but we feel that rates are plateauing right now.
Whilst foreign buyers are shown to be less likely to take out a mortgage than nationals (34% versus 78%), when they do they borrow more against the properties in percentage terms and they also buy at a higher average price.
In terms of the outlook, falling inflation and low economic growth could well mean that interest rates have now peaked, which would be welcome news for existing borrowers and potential homebuyers. The ECB kept the benchmark rate at 4% in October, after 10 consecutive increases, and we may get to see the rate decreasing at some point in 2024.
In summary, the market conditions for real estate agencies and mortgage brokers in Spain remain challenging, but we at Mortgage Direct feel bullish about the mortgage market going forward, certainly in terms of foreign buyers, as we anticipate that more of them will opt to take out a mortgage and also more attractive interest rates could be on the horizon.