State of play of the residential housing market in Spain

The Bank of Spain (BoS) provides in-depth analysis on the state of the housing market, its recent trends and the risks and problems of accessibility. In the BdE’s view, the vulnerabilities and risks to financial stability associated with this market are contained, though getting access to housing has become more difficult in recent years, especially for low-income households — young people and immigrants — and in certain geographies — urban and tourist areas.

• Strength of housing sales in recent years: Exceeding 700,000 units in 2022 and reaching around 640,000 in 2023, with a predominance of used housing transactions, due to significant stock accumulated in previous decades and the shortage of new housing. In recent years, purchases by foreign nationals stand out (all-time high of some 134,000 homes in 2022), as well as the lower requirement to take out a mortgage (45% of transactions required new mortgage loans in 2023 compared to approx. 55% in 2021 and 60% in 2007).
  
  
• A housing shortage: In 2023, residential investment in Spain stood at 5.7% of GDP, lower than the 6.1% of the eurozone and below the annual averages observed in the 1980s and 1990. The number of requests for licenses to build new homes reached close to 110,000 in 2023, well below the average of 320,000 per year in the 1990s or the 550,000 in the first decade of the 21st century. Furthermore, housing supply (completed homes) has been below the net household formation in 2022 and 2023, producing a shortage of 325,000 homes that will be increased in the coming years.
  
  
• Sustained growth in purchase and rental house prices. In Spain, house prices have increased 56% in nominal terms since 2014 (still 2% below their maximum in 2007), although in real terms they are 28.5% below the 2007 high. This growth has been more intense in new housing, large urban areas and tourist areas. Rental prices also showed average annual growth of 7%-8% between 2015 and 2022, compared to an average annual growth of 6% in nominal terms in purchase prices.
  
  
• Residential rental market: This has grown strongly since the economic crisis that began in 2008 — up to 3.6 million primary residences in 2023 (compared to approx. 2.3 million in 2007), in which 18.7% of families reside, especially lower-income households, young people and foreign nationals. According to the BoS, individuals and smallholders predominate, and the reduced weight of social housing rentals is of note. In Spain, the proportion of property ownership in 2022 was still higher in Spain (75%) than in the EU (65%), which indicates a smaller size of the rental housing stock.
  
  
• Affordability to buy or rent in Spain: The purchase price-gross annual income ratio, which provides the number of years of current income needed to satisfy the price of a residential home, has shown a substantial increase since the beginning of the Covid-19 pandemic, reaching an average 7.3 years at the end of 2023, which is below the maximum observed in 2008 (9.5 years), but still double the average of the period 1987-2000. The average amount that tenants spend on rent has decreased slightly during the last decade from 25.5% of their gross income in 2011 to 22.5% in 2022. However, this ratio reaches an average 45% for low-income groups.