Madrid and Barcelona usually lead trends in the Spanish real estate market, which is experiencing paradoxical times. While sales fell by 14.5% until June (according to notarial data) in Spain as a whole, prices continue to rise, oblivious to the brutal rise in mortgage prices in the last year of increases in interest rates by the ECB.
With data from the idealista.com portal at the end of August, the price of housing in our country has risen on average by 7.2% in the interannual rate, well above the fluctuation of its two large cities: in Madrid the increase reaches 3.1% which moderates to 1.7% in the case of Ciudad Condal. Is it perhaps a sign of what will happen in the rest of the country or do these two large capitals have their own characteristics? Experts undoubtedly point to a trend of slowing prices in the housing segment, although without falls, for the moment, and distinguishing between Madrid and Barcelona.
Without a doubt, its characteristic of being cities that receive population both from the country itself and from the rest of the world – Málaga has also recently targeted this quality – makes it different. But there is another important cyclical fact since purchase prices are at historic highs and so are those for rentals. For Francisco Iñareta, spokesperson for idealista, “the most dynamic markets, such as Madrid, Palma, San Sebastián or Málaga have reached their historical maximums, and in others such as Alicante or Barcelona, they are about to exceed the levels of 2007. These levels are so Price increases partly explain the lower percentage increases,” he comments. An idea reinforced by Carlos Smerdou, CEO of Foro Consultores Inmobiliarios: “the increases in Madrid and Barcelona are no longer so high because prices are high. But let’s not forget that percentage increases, even if they are minor, do have an impact on the final price of a home,” he explains.
The first place due to high housing prices in Spain is held by San Sebastián with its 5,326 euros per square meter, but it is followed by Barcelona with 4,141 euros and Madrid very close with 4,015 euros, more than double the 2,004 euros per square meter. for the entire Spanish average. But these average prices also include extremes in the valuations of the different districts of large cities.
A more detailed study by Fotocasa points out how all the districts of Madrid, except Puente de Vallecas and Barajas, have reached record prices in these last three months of the summer season. And focusing on the Madrid neighborhoods, a high volume, 70% of them, have presented maximums during 2023. Therefore, the more local trend, from neighborhoods, districts and even the city indicates that it is a very tense market , in which the imbalance between supply and demand is increasing. In the case of Madrid, the district of Salamanca is the one that offers the highest average price, close to 7,000 euros per square meter, followed by Chamberí and Chamartín with 6,400 and 5,700 euros, respectively. Villaverde, with nearly 2,000 euros, leads the low price of housing in the capital, closely followed by Usera and Puente de Vallecas, which move around 2,200 euros per square meter depending on the source used in the query.
In the case of the districts of Barcelona, of the 10 analyzed by Fotocasa only 4 have reached a price record during 2023, and “if we look at the neighborhoods, of the 65 analyzed only 13 have reached their maximum value. Therefore, the general trend of the city is once again reflected in its local markets,” indicates María Matos. Sarriá-Sant Gervasi with around 6,000 euros per square meter (5,547 for Idealista and 6,000 for Fotocasa) leads the most expensive home in Barcelona and is followed by Les Corts and Eixample, which are around 5,000 euros. Nous Barris with 2,500 euros and Sant Andreu together with Horta Guinardó, both above 3,000 euros per square meter, close the group of districts with the lowest price.
Trend
The differences between these cities are found in their dimensions and population. While Madrid has an area of 600 square kilometers and a population of 3.3 million inhabitants, Barcelona has 100 square kilometers for 1.6 million. Carlos Samerdou points to its great housing needs due to the continuous attraction of population and deciphers the reasons for this lack of construction. “The city of Madrid alone would need more than 10,000 new homes per year until 2030 and the planned homes do not exceed 7,000 per year, this indicates that the deficit will grow year after year. The problem in Madrid is that new developments are late, although they are now speeding up significantly. These will put some 150,000 new homes on the Madrid market over the next 20 years, but it will take two or three years for the first homes to see the light of day,” he explains.
However, for the expert from Foro Consultores Inmobiliarios in the case of the city of Barcelona, the problem is that it cannot grow since the sea and the mountains prevent it. “The demand exists, but the supply cannot respond. Furthermore, new projects within the city must allocate 30% of the housing to social use, this has reduced the number of visas, since it makes their implementation unfeasible,” he concludes.
Cristina Arias, director of the Tinsa research service, points to these cities as hubs of activity that tend to react in advance to changes with respect to other geographies. “In the first half of the year, they registered more moderate rates of variation in their prices than in other main capitals, but still at strong levels between 2% and 5%. The slowdown to date has been most pronounced in Barcelona,” she explains.
However, the director of Fotocasa studies makes a clear distinction between both cities according to investment trends. “Madrid endures the trend towards moderation in prices that began in the second half of 2022 (coinciding with the first rate increase), due to the great attraction of purchasing demand.” And the expert adds: “in Barcelona, this trend of very slight increases in prices has already been occurring since 2022, and has probably moderated purchasing demand more abruptly than in Madrid. Madrid continues to have high volumes of investment in the sector, which increases demand, and therefore, puts pressure on the price,” she explains.
Rent
Experts see more homogeneity between both capitals when they talk about the rental market. Once again, Barcelona is ahead in average prices with a monthly cost of 19.4 euros per square meter, compared to 17.4 euros in Madrid. Idealista.com spokesperson Francisco Iñareta points to historically low levels of available supply. “As long as these tensions do not disappear, we will continue to see prices continue to grow. For the ninth consecutive month, prices are at historic highs in Spain, as well as in most of the provincial capitals.” And he considers it important to “rebalance the relationships between tenants and owners, since the latter, far from being the problem, are the most important part of the solution,” he concludes.
The scarcity of rentals is also the explanation that Smerdou gives for its high prices. And he considers that “price control has not helped, but in the end, there comes a time when they cannot increase any more because the demand, although there is a lot, cannot be met. Or you have to choose to share housing, as is happening,” he says. A topic of shared housing that the Fotocasa expert takes up: “the high price of rent is causing two trends: the first is the expulsion from the market of tenants with lower incomes, who in many cases reject the idea of emancipation; The second is the increase of 14 percentage points in the demand for rooms in shared housing as a housing solution due to not being able to afford the price of a complete home,” she explains.
For María Matos, the main reason that explains the overpricing of rental housing is the lack of available supply. “The stock of rental housing is at a minimum, which represents a great obstacle for almost 40% of tenants. This casuistry results in a very compact market in which there is little tenant turnover, where the search process is lengthened and which is increasingly difficult to access,” she concludes.
A bleak outlook for housing both for purchase and rent. Supply remains very weak compared to demand needs. And although home sales have fallen by almost 15% this year compared to last year, they still remain above the pre-pandemic levels reached in 2019.
Shielding new housing in large cities
You can’t go down. The perspectives on the evolution of housing prices always make distinctions between newly built and used ones. Currently, in new housing it is difficult to slow down or lower prices because the supply has been scarce for a long time. “Added to this is the fact that land prices and construction costs are not going down either. And while it is true that demand for new housing has also declined, the decrease in supply has offset the drop in demand. Given this, prices cannot go down for new housing,” explains the expert from Foro Consultores Inmobiliarios. In used housing, it depends on the personal situation of each owner and there may be a greater slowdown and there may even be downward price tensions in certain areas or circumstances. Unfeasible projects. Carlos Smerdou attributes the lack of projects in the housing market to the price of land, construction costs and financing costs, which are very high. This makes it difficult to fit feasibility plans together. “And this unviability is more evident in the subsidized housing market.” And he adds: “we are experiencing a drought of projects and marketing competitions. The few projects come from developers who have an abundant reserve of land to build on. Soil maturation processes should be accelerated at low times of the cycle to prevent housing from becoming more expensive at high times. It is not done, and that causes inflation throughout the process,” he concludes.
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