What will happen to house prices in 2024?

Are you considering purchasing a newly constructed home or concerned about the future of your real estate investment? With the housing market's constant fluctuations and the recent increase in interest rates, it is natural to wonder about the housing price forecast for 2024.

Contextualising the real estate market in Spain

According to a study on new construction homes in the Costa del Sol carried out by Prime Invest at the end of last year, the availability of new construction homes in this area was reduced by half in Q2 of 2022, compared to pre-pandemic levels.

The main drivers behind the high number of home sales were the savings associated with staying at home, the desire to acquire second homes near the beach or mountains, and foreign buyers actively seeking new construction homes.

However, this trend began to slow down in mid-2022 due to inflation and the increase in the cost of living. This also led to the increase in interest rates and the increase in the cost of mortgages. As a result, home purchases decreased by the end of the year.

Analysis of housing supply and demand in 2023

The CaixaBank Research report on the Real Estate Sector in 2023 analyses the supply and demand of housing.

According to the report, home sales decreased in the first quarter of 2023, particularly for newly constructed homes. Sales by foreigners have been more resilient compared to sales of first and second homes by Spaniards.

Research indicates a significant shortage of available housing to meet the needs of the changing demographics.

However, the resilient labour market, solid job creation, and wage growth will continue to sustain the demand for housing in the most popular tourist areas.

Real estate market forecast for 2024: Will house prices fall?

The housing price forecast for 2024 indicates a moderate and temporary decline, according to the report on the Bankinter real estate sector.  

Recent increases in interest rates have led to higher monthly payments for those with variable mortgages. Additionally, rising prices have discouraged investors, which is likely to result in a decline in home values in the coming months.

In contrast, the recent approval of the housing law and other measures, such as the introduction of the youth rental bonus, aims to alleviate the complicated situation of the real estate market. It will be necessary to wait until next year to more precisely evaluate the reaction of the real estate market more precisely.

In the main Spanish cities, such as Barcelona or Madrid, considerable interest and demand for purchasing homes persists, which will result in moderate price increases in 2024. It is important to ensure that any changes made are too drastic.

However, in certain areas, there may be a decline in prices starting in 2023. It is predicted that house prices will rise again in 2025, with a 1% increase due to a more moderate Euribor, accessibility ratios returning to historical averages, a balanced supply and demand, and more prudent mortgage financing.

Factors to consider for investors regarding housing price forecasts

In a scenario of limited supply, there are several fundamental points to highlight:

• The marketing of new homes, which are generally sold off-plan, has maintained a constant demand, minimising expectations of significant price declines. It is recommended to pay attention to new real estate promotions to avoid missing good opportunities.

• Considering energy efficiency criteria is crucial,  as sustainable housing provides savings throughout its useful life. New homes have notable advantages over second-hand homes.

• At an international level, observing house prices in various countries over the last 50 years, shows a repeated trend: growth, peak, fall and expansion until reaching a higher peak.

This is supported by a recent study on real estate markets in advanced economies conducted by CaixaBank Research. The study confirms our previous statements that the price adjustment in Spain will be almost imperceptible.

If you have any doubts about how to proceed in the real estate sector in 2024, our consultant team is available to answer your questions and ensure that your investment in housing is always profitable for you and your family.