Both new and used home prices saw a modest 0.1% rise in the first quarter, yet they remain 3.3% higher compared to the same period last year. This trend is evident in the Tinsa ‘IMIE Local Markets’ statistics, indicating that the Balearic Islands stand out as the sole autonomous region where housing values have exceeded the peak of the real estate market.
Specifically, the Balearic Islands have surpassed their historical peak for the fourth consecutive quarter (reached between July and September 2008), currently standing at 2,922 euros per square meter, a 7.1% increase from that benchmark. Known for its reliance on tourism, both domestically and internationally, this region also faces limited housing supply.
Additionally, house prices have hit record highs in Palma de Mallorca, where purchasing a house costs 4.2% more than during the peak years of the property market. Similarly, Malaga’s housing market is only 3.6% below its peak, while the Madrid region remains 9.5% lower. Overall, Spain has seen a 38.6% increase in average house prices since the low of 2015, still lagging 18.2% behind the 2007 peak.
According to experts, the scarcity of housing supply in high-demand areas “will continue to buoy prices,” while stable employment and recovering purchasing power, aided by controlled inflation and wage increases, will uphold financial stability among households and bolster consumer confidence.
Notably, the Balearic Islands lead the annual price increase at 8.3%, followed by the Valencian Community (7.1%) and Castile-La Mancha (6.7%), the latter benefiting from its secondary market status. On the other hand, the Community of Madrid (2.3%) and Catalonia (2.4%) have seen more moderate increases, while regions like Murcia, Asturias, and Ceuta remain stagnant around 0%.
Analyzing the price evolution of the past quarter, experts note ‘stability’ across communities overall. Catalonia (-2%) and Ceuta (-1.7%) experienced the most significant declines, while Extremadura and La Rioja stood out with increases exceeding 2%, along with coastal regions like the Balearic Islands, the Canary Islands, and the Valencian Community.
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In terms of major cities, there was a slight “slowdown” in the first quarter, with annual increases ranging from 0% to 4%. Notably, capitals like Guadalajara (15.1% year on year) and coastal cities such as Valencia, Malaga, Santa Cruz de Tenerife, and Almería showed around 8% price increases compared to the previous year.
Housing in Madrid is now 3.9% more expensive than in the first quarter of 2023, and Barcelona has seen a 2.6% increase, indicating a slowing trend. Both cities also experienced moderate declines in average house prices compared to the previous quarter.
Looking ahead, while high interest rates are expected to continue limiting overall housing demand throughout the year, there are expectations of market recovery due to an upcoming change in monetary policy, which could potentially dampen investment demand compared to its current level during these transitional months.
Theoretical annual housing efforts of Spaniards, representing the percentage of disposable income allocated to the first mortgage payment, rose to 34.3%, with eleven counties exceeding the threshold of reasonable effort (35%). The Balearic Islands, Málaga, and Madrid face the greatest pressure, with theoretical efforts of 58.6%, 51%, and 44.3% respectively. Among major capitals, Barcelona’s theoretical effort stands at 51.9%, followed closely by Madrid (51.4%) and Málaga (50.6%).
