As of the end of the second quarter of 2024, renting a home in Spain costs an average of 13.4 euros per square meter per month. This marks the highest point in the historical series recorded by Idealista, the publishing company of this report. Year-on-year, rental prices have increased by 13.2%, with all provincial capitals experiencing price hikes. A total of 34 cities, including highly pressured markets like Barcelona, Madrid, Valencia, Málaga, Palma, and San Sebastián, have seen record highs due to a significant drop in available homes.

Second-hand Housing Prices Continue to Climb

The price of second-hand housing in Spain has also reached a new peak, rising by 7.5% year-on-year during the second quarter. This increase brings the average price per square meter to 2,138 euros. On a quarterly basis, prices have risen by 2.9% over the past three months, setting a new historical record for the country.

Expert Insights on the Housing Market

Francisco Iñareta, spokesperson for Idealista, highlighted the core issue in the current housing market: the lack of available supply. ‘The main problem facing the real estate market today is the scarcity of available homes. There has been a critical shortage of new construction in the sales market over the past 15 years, with very few municipalities daring to develop new land. This shortage of new homes places all the pressure on the used housing market, which cannot meet the current demand, pushing prices higher. Additionally, the lack of available properties also affects the number of transactions and mortgages granted. Measures need to be taken to expedite development processes, especially in the most stressed markets,” Iñareta explained.

Seven Capitals Set Housing Price Records in June

All Spanish capitals have seen price increases over the past 12 months, with the exception of Pamplona, where prices fell by 1.1%. Málaga leads the way with a 19.9% increase, followed by Alicante (16.9%), Valencia (14.7%), Santander (13.7%), Soria (13.6%), and both Madrid and Santa Cruz de Tenerife (12.4%). In major markets, prices have also risen in Palma (9.4%), Sevilla (7.5%), Barcelona (7.2%), San Sebastián (5.2%), and Bilbao (4.1%).

San Sebastián remains the most expensive capital in Spain, with prices at 5,461 euros per square meter, followed by Madrid (4,514 euros/m²), Barcelona (4,430 euros/m²), Palma (4,114 euros/m²), and Bilbao (3,301 euros/m²). Conversely, Zamora is the most affordable capital, with a price of 1,154 euros per square meter.

Global Housing Market Trends

Globally, housing prices have shown resilience despite high interest rates. In the US, Australia, and parts of Europe, the real estate markets have largely ignored these financial pressures. In April, the global housing price index, excluding China, increased by over 3% year-on-year. Housing prices in the US are 6.5% higher than last year, while Australian prices have risen by 5%, and in Portugal, prices are rising.

These global trends follow a difficult period where housing prices, adjusted for inflation, dropped by 20% in countries like Canada, Germany, and New Zealand. In certain US cities, such as San Francisco and Phoenix, prices still have not returned to their previous highs. High interest rates and mortgage costs have further strained housing affordability. For instance, in the UK, the percentage of people finding it hard to afford housing has risen dramatically, from 24% in early 2022 to 41% currently.

The Outlook for Housing Prices

When adjusted for inflation, global housing prices have decreased by only 6% from their peak, bringing them back in line with pre-pandemic trends. Notably, this housing crisis has been one of the shortest in history, lasting just a few months.

However, some experts are concerned that persistently high interest rates could eventually cause a significant downturn. In the US, the proportion of mortgages in arrears is at a historic low of 1.7%, a stark contrast to the over 11% seen during the peak of the 2007-09 financial crisis. Similarly, New Zealand, which was one of the most affected developed countries, now has arrears rates that are consistent with pre-pandemic levels. Most of the Eurozone, excluding Germany, also shows fewer signs of financial distress in the housing market.

The global housing market trends offer Spain both warnings and opportunities. While resilient markets show that strong demand can sustain prices, they also emphasize the crucial role of adequate supply. By learning from these international examples and implementing targeted policies to increase housing availability and affordability, Spain can address its current housing challenges and create a more balanced and sustainable market for the future.