CaixaBank’s recent report forecasts a notable shift in Spain’s housing market, predicting both lower borrowing costs and rising house prices in the near future. This outlook is driven by the European Central Bank’s recent interest rate cuts, expected to bring the Euribor below 2.5% by year’s end, significantly reducing mortgage rates. This decrease in borrowing costs is likely to boost housing demand, especially in an already undersupplied market.
CaixaBank has revised its house price growth forecast for 2024 from an earlier 2.7% to 4.4%, signalling stronger-than-expected price increases. The reduced cost of borrowing will enable more people to secure mortgages, driving competition and pushing house prices higher. Contributing to this is a broader demographic trend: population growth and rising immigration rates are expected to intensify housing demand in the coming years. The projected increase in demand, however, is set against a backdrop of limited housing supply, exacerbated by high construction costs.
Spain’s construction sector has struggled with rising costs, which have surged by 30% since the pandemic. This has stunted the building of new homes, making it unlikely that the housing supply will meet future demand. Over the next two years, only about 240,000 new homes are expected to be built, while estimates suggest that 600,000 new households will require housing during this period. The stark gap between housing supply and demand could further push prices upward, creating a challenging environment for buyers, especially locals seeking affordable homes.
This confluence of factors—lower mortgage rates, population growth, and a constrained housing supply—points to a highly competitive real estate market. With fewer homes being built and borrowing becoming more accessible, competition is expected to intensify, potentially driving housing prices even higher. This could make it more difficult for Spanish residents, particularly first-time buyers, to enter the property market, adding pressure on policymakers to address housing affordability.
The coming months are poised to bring both opportunities and challenges for the housing market. While lower borrowing costs may provide relief to some, the persistent imbalance between supply and demand, coupled with rising prices, could have lasting effects on housing accessibility. The full impact of these dynamics will become clearer as the market continues to evolve.