Spain is a country of contrasts. Since 2015, housing prices, both for the appraised value and for rent, have been in ‘free rise’, with increases of more than 20%, until 2022 in the case of rentals and until 2023 in the residential price, according to Los latest data from the Ministry of Housing and Urban Agenda. However, the horrible price of the houses is not determined by the cost of the bricks, nor by the labor, nor by the size, but by the users’ desire to live in them. This means that the areas of Spain with less demand for houses have been able to weather the vertical increases in real estate costs.
In general, in the main cities in the Mediterranean areas, around Madrid and the islands, housing and rental prices have skyrocketed above average, while in the cities of central Spain that are less connected to the capital and in the areas of the Atlantic coast the price increases are much more moderate.
Thanks to this dynamic, towns like Palencia have reduced the assessed value of free housing by 3%, from 1,203 euros per square meter (m²) at the start of 2015 to 1,166.6 euros/m² in the quarter of 2023. On the contrary, in Ibiza the price has grown by 94% in that same period, from 2,240.8 euros/m² to 4,350 euros/m².
The same distribution in the evolution of costs is reproduced in the rental market. In those more peripheral areas, such as Avilés, Ponferrada or Oviedo, the median value – the most common – of rents has increased below the average, by 7.5%, 11.13% and 12.5 %, respectively, compared to a national average of 22.26% between 2015 and 2022 – latest data available. Once again, the real estate markets of the islands, the Levante areas and areas close to Madrid have suffered the greatest increases in prices. Valencia increased the average price by 47.5%, Ibiza by 41.6% and Palma de Mallorca by 40%.
A question of demand and demographics.
The increase in housing prices has a close relationship with where the population grows the most. The latest sector report from CaixaBank Reserach estimates that demand is the main factor that determines the price of housing, and in a context in which property construction is on the decline, this trend is increasing. According to the Construction Labor Foundation Observatory, between 2009 and 2022, 110,000 homes were built per year on average, compared to the 180,000 per year that will be needed until 2037 to meet the population growth expectations of the National Institute of Statistics (INE).
Furthermore, the demand in these areas is being pressured by the foreign population, who are the ones that are most collaborating in increasing the population of the indicated regions. The banking institution’s study team estimates that this trend has been occurring since 2014, which has further heated the areas with higher costs and has increased the price gap between these municipalities with respect to the most depressed areas and which continue depopulating
According to data from the INE Continuous Population Survey, the provinces that registered the greatest increase in the foreign population are located in the designated areas of Levante, Madrid and the islands, which added six out of every ten new foreign residents between April 2023 and January 2024 (240,187 between Madrid, Barcelona, Valencia, Alicante, Balearic Islands, Murcia and Tarragona, compared to a total of 390,022 throughout Spain).
On the contrary, provinces such as Cáceres, Soria, Zamora, Cuenca, Teruel, Huelva or Córdoba lost a total of 2,601 inhabitants, despite having registered a positive immigration balance of 5,571 new neighbors.
The impact of Madrid goes beyond the Community
The CaixaBank Research report also shows how the cities around Madrid are also affected by the city’s price dynamics, despite being in different provinces. The data collected by the bank’s analysis institute positions Guadalajara among the five provinces that increased its price and population the most in Spain, along with the Balearic Islands, Malaga, Santa Cruz de Tenerife and Valencia.
Specifically, the city of Guadalajara was the provincial capital where the price increased the most in year-on-year terms, 16.8% according to the appraiser Tinsa. The firm specialized in the sector estimated that the city maintained moderate residential prices after the pandemic and prices have begun to heat up more intensely at the end of 2023, in parallel with what was observed in the cities surrounding Madrid.
