2024 is just around the corner, and you may be thinking about making it a special year in your life—for example, to mark the start of a new chapter in a new home. After a somewhat challenging period for investing in the real estate market, the current outlook appears more optimistic in the short and medium term, as we’ve seen in this very blog.

Forecasts for housing prices in 2024 indicate that, overall, they will remain stable—especially in small and medium-sized cities and towns. For this reason, buying a home appears to be a truly attractive alternative to renting, where prices will continue to rise due to high demand that supply is far from being able to meet.

What factors will cause housing prices to rise or fall?

However, these housing price forecasts for 2024 depend on factors that are both external and internal to the properties themselves. And today we want to talk to you about them so you’ll have a clearer picture of what the real estate market has in store for us in the coming year.

External factors

These are the factors that influence a home’s price and are independent of the home’s specific characteristics. They include the following:

Real Estate Market Conditions

Housing costs are strongly influenced by the current social and economic context. In fact, we have previously noted that there are various factors that influence the real estate market:

• Interest rates, which determine the percentage of additional cost (in interest) that the buyer must pay to their bank or lender when taking out a mortgage to purchase a home. They are typically calculated based on the Euribor, a benchmark index that has skyrocketed over the past year and a half from 0.013% in April 2022 to 4.14% as of last September. Consequently, for adjustable-rate mortgages, the cost has risen sharply due to various factors, such as inflation and growth forecasts.
• State of the global economy: Social and political events also influence the real estate market. For example, the energy crisis that arose in the wake of the war in Ukraine has had multiple consequences for home sales: from rising prices for raw materials and construction costs, to rises in inflation and the Consumer Price Index (CPI), resulting in a decline in citizens’ purchasing power and ability to save.
• Supply and Demand: The aforementioned rise in interest rates and the increase in inflation or the CPI have meant that, since early 2022, fewer people have been willing to buy a home. Consequently, domestic demand has fallen in recent months and has only been offset by foreign demand, which reached a high of 15.9% in the third quarter of 2022. Thus, the medium- and long-term consequence of lower demand is that supply will increase and sellers will have to lower their prices.
• Government policies: The government can influence the real estate market by making specific decisions. A good example in Spain is the Housing Act, which is having an indirect impact on the buy-sell market in the autonomous communities where it is being implemented. Why is this happening? Decisions such as setting a 2% cap on rent increases during annual lease renewals or imposing price caps in areas with tight residential markets are causing not only rents themselves to rise but also a decline in supply. This is undoubtedly encouraging many landlords to stop renting out their properties and put them up for sale instead.

City where the home is located

The city where a home is located is also a factor that influences housing prices in 2024. Generally, the larger a city is and the more advantages it offers, the more expensive the price per square meter will be.

Thus, homes located near the city center tend to command higher prices; however, this is also influenced by other factors, such as per capita income, taxes, housing laws, or even the presence of additional amenities, such as beaches, theme parks, etc.

Location of the home

Regardless of the city where it is located, the specific location of a home can cause prices to vary significantly even for properties with similar characteristics. Proximity to the beach (if applicable), parks, and green spaces; transportation links to the rest of the city and other towns; the presence of nearby healthcare facilities, schools, and services; the availability of recreational options; and so on are also factors that typically influence the final cost.

Currently, according to the Idealista website, San Sebastián is the most expensive city in Spain to buy a home, at 5,326 euros per square meter. It is well ahead of the other cities on the podium, Barcelona ( 4,141 €/m²) and Madrid ( 4,015 €/m²).

Internal factors

These are factors that influence a home’s price and are related to its specific characteristics. The main ones are as follows:

Square meters of the home and its current condition

The size of a home is a factor to take into serious consideration, both in terms of total floor area and usable floor area. And, naturally, it is closely linked to the average cost per square meter in the city or town where it is located. Thus, a^{100-square-meter} homeⁱⁿ downtown Madrid will not cost the same as one in downtown Getafe, a town in the southern part of the Community of Madrid.

In addition, the condition of the property is another key factor. In the case of a new-construction purchase, the property will be appraised at its highest value because it has never been occupied, while use over time will cause that value to decrease due to wear and tear and the need for renovations.

Number of rooms and layout

The number of bedrooms is a plus, as are the number of bathrooms and the presence of terraces, a storage room, a parking space, etc. Furthermore, if the property has a good layout and offers its own storage spaces, it may be valued higher during the appraisal.

Elevation and orientation

The higher up a floor or apartment is, the more expensive it will be (provided it has an elevator). This is because there will be less noise, less pollution, and, most likely, more natural light and better views. In addition, the building’s orientation also plays a role in determining the number of hours of sunlight it receives, ventilation, and the aforementioned views (units facing the outside are valued higher than those facing interior courtyards).

Facilities and Common Areas

The immediate surroundings of a home are yet another factor that already influences—and will continue to influence—home prices in 2024. We’re referring to the facilities and services that the community may offer, such as a swimming pool, gym, sports courts, gardens, a recreation room, or a doorman or concierge. In fact, living in a gated community offers a certain level of exclusivity and also helps increase the property’s value.

Energy efficiency

This is the newest aspect, but no less important for that. More and more people are prioritizing sustainability and energy efficiency when evaluating the housing market, which is why the presentation of energy efficiency and health certificates is a good reason to raise the property’s price slightly.

The fact is that, while building sustainable and healthy homes is more expensive, purchasing them is also more profitable in the long run for investors or tenants: it is estimated that up to 79% of these real estate assets will yield higher returns over the next 4 years; while savings on energy consumption (compared to non-sustainable properties) can reach 90%.

Keep all these factors in mind when choosing your new home in 2024

We hope this article has helped you make your own predictions about housing prices in 2024. With this information, you’ll be able to prioritize the aspects that matter most to you and your family, so you can make the right choice based on your needs and find your ideal home.

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