MARKET REPORT
Barcelona Property Market 2023
Introduction
Introduction
Since the 2008 meltdown a notable feature of the overall Spanish Property Market during the recovery phase was how disconnected the overseas and domestic sectors of the market were. In general, overseas buyers were not really affected by what was going on in the Spanish economy, however bad that was. In fact, the overseas part of the property market was in recovery mode from 2012, with transaction numbers increasing every year since, at least until Covid-19 arrived. By that time, the overseas sector of the market was 70% larger than in 2008. In contrast, the domestic side declined until 2015 and when the pandemic arrived in 2020 it was still 40% smaller than in 2008.
We still see this divergence in the property market today in most of the locations where the majority of overseas buyers go. In addition, overseas buyer market share has shot up in recent years and is now an average 20%, although the latest statistics show it is much higher in some places; 41% in the Balearics and 40% in Málaga province for example.
However, that does not apply in Barcelona and other Spanish towns and cities. The overseas element is relatively small and it is the domestic sector that dominates. Issues such as mortgage costs, price rises, inflation and unemployment have an impact on the property market in a way that doesn’t occur in locations where the foreign sector may be as much as 50% of the overall market.
Where The Numbers Come From
The Notaries provide the most accurate statistics, with breakdowns by nationality, autonomous regions and prices per square metre. These are published half-yearly. We get the 1st half year in October of the same year and the 2nd half in April of the following year. In addition, I analyse Ministry of Transport, Movement & Urban Planning (MITMA) statistics for breakdown by province and municipality. At these levels it is easy to spot market hotspots. However, they do not count by nationality, foreign buyers are counted as a block
In contrast, the Property Registries only record when a transaction is inscribed in the Registry and as this may be weeks, or even months, after it completed in from of the notary there is always a discrepancy. For accuracy, stick with the Notaries.
As always, when we write our annual property market reports as a new year begins there is always the disadvantage of not having all the statistics for the previous full year. The last quarter are collated during the first quarter of the following year but we do update our reports when the latest figures are released.
The Notaries provide the most accurate statistics, with breakdowns by nationality, autonomous regions and prices per square metre.
The Barcelona Property Market
In comparison with the foreign/domestic market share breakdown in the other Mediterranean coastal locations where most overseas buyers head for, the Barcelona property market looks very different. While the overseas market share of the total Spanish property market is currently 19.2%, it’s double that in both the Balearics and Andalucía, around 40%. Meanwhile it’s 22% in Cataluña. and 17%, in Barcelona province. At the provincial level, Barcelona is, of course, by far the most important of the four provinces that make up the autonomous region of Cataluña. The latest statistics indicate that Barcelona province accounted for 63% of all property transactions in Cataluña in 2022. Furthermore, while Barcelona city is just one of 310 municipalities in the province 25% of all purchases happen in the municipality. While there is no breakdown by nationality at the municipal level our experience suggests that no more than 10% of the city’s property market can be attributed to international buyers.
In our view, it makes sense to think about the Barcelona property market as two markets rather than one homogenous market. We already do that with other locations in the Mediterranean coastal regions and the Balearic and Canary Islands, separating the domestic sector from the overseas one because they perform differently. However, as far as Barcelona is concerned, the split isn’t between domestic and overseas sectors, rather the distinction is between properties for own use and those purchased as rental investments. The former tend to be larger, between 90m2 - 150m2, aimed at couples and families and spread throughout the metropolitan area and more vulnerable to price falls in 2023. The latter are usually smaller and very centrally located and our expectation is that price rises are more likely than falls.
Why The Difference?
Conditions looked relatively stable at the end of 2021, heading into 2022. Our concerns then were focused on how the Barcelona property market was likely to perform as the disruption caused by the Covid pandemic receded. Then Russia invaded the Ukraine and everything changed. Energy costs surged, inflation rose sharply, interest rates soared and with them mortgage repayments. Not all those with mortgages are affected though, due to the huge increase in long-term, fixed rate loans. These were non-existent in the early part of the market recovery but grew to approximately 65% of all new loans in Spain at the start of 2022, so many home owners won’t see their repayments increase at all. However, anyone looking for a fixed-rate loan now will find what’s on offer much more limited as Euribor rates entered 2023 at the 4% level. With pressure on household budgets from so many different sources, coupled with uncertainty about how long theses conditions will last, it is hard to see how some price falls will be avoided.
In contrast, although these factors also affect owners of rental properties, different conditions apply. Investors seek protection from the volatility of stock markets and look to property as a hedge against inflation. In addition, in the first full year of no lockdowns or travel restrictions, the return of inward business travel and foreign students has been very strong and demand remains high, resulting in price rises across the rental market and improved profit margins. We think price corrections for this type of property, relatively small and centrally located, are unlikely in the year ahead. In addition, prices should hold up in the new-build sector due to the low level of supply coming though.
Conditions looked relatively stable at the end of 2021, heading into 2022. Then Russia invaded the Ukraine and everything changed.
What Happened in 2022
In spite of the multiple financial shocks resulting from the invasion of Ukraine the property market at both the national and some regional levels proved remarkably resilient. The final count for 2022 showed the overall Cataluña market up 7.8% on 2021, at the provincial level Barcelona province rose 5.2% while at the municipal level there was an increase of 6.2%.
Throughout 2022 the tendency was for prices to rise, nothing dramatic but up nonetheless, following three straight years in which the tendency has been in the opposite direct. Again, nothing dramatic but definitely down. Currently, the average pm2 price in the city is €4,159, up 4.84% on the year. However, set against the 2007 high of €5,291 pm2 it shows just how far the market fell after 2008 and that even today, prices are still 27% off the peak. It also interesting to note that according to a report from Spain’s Institute of Statistics (INE) in December 2022, prices were within 5% of the highs last seen just prior to the 2008 meltdown. However, the report was referring to national averages and averages always hide variations.
In terms of the ten districts that make up the Barcelona municipality, five zones were well below the average price pm2 of €4,150 and two registered slight price falls..Two districts are more or less in line with the average and only two are well above, Sarrià Sant Gervasi at €5,314 pm2 and Eixample, €4644 pm2. The highest price rises occurred in Sant Andre and Eixample, up 4.3% and 3.2%, respectively.
2023 Predictions
In our opinion, the evolution of the 2023 Barcelona property market depends largely on the length of time property owners, particularly those in the own use sector, expect present conditions to continue. We believe the perception of the majority when the invasion of Ukraine started in February 2022, triggering the subsequent energy crisis, global interest rate and inflation rises, was that the crisis would be of short duration. If that perception changes during 2023 then we can expect to see downward pressure on prices in the resale sector if demand falls as a result. On the other hand, If inflation has already peaked, if interest rates go no higher and mortgages remain affordable for most people 2023 may be a continuation of 2022, which, in most respects was a very good year, given the challenges.
However, demand for high quality apartments in very central locations to rent remains strong and supply is scarce so we see no scope for price falls, on the contrary price rises are more likely. This also holds true for the new-build sector, demand outstrips supply, so we believe prices will hold up well..
©Iñaki Unsain Romero
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Demand for high quality apartments to rent in very central locations remains strong and supply is scarce so we see no scope for price falls, on the contrary price rises are more likely.
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