Low interest rates and the savings accumulated during the pandemic are boosting the real estate sector, which, according to analysts, could see prices rise by about 4% this year.

The real estate sector is in good shape. This is confirmed not only by analysts but also by data collected by sources ranging from the National Institute of Statistics to specialized agencies and websites. In December 2021 alone, 48,119 real estate transactions took place nationwide. According to INE data, a total of 9,524 of these involved new-construction properties, while the remaining 38,595 were transactions involving existing homes.

Based on the data, the outlook for the real estate market in 2022 looks promising; after all, the number of sales has increased by 32.85% compared to the same month last year. And there’s more. In the case of new-construction developments, the figures confirm buyers’ growing interest in this type of housing. According to the Property Transfer Statistics, the real estate market has seen a 26.5% increase in the number of transactions over the past year—a figure that rises to 45.2% when compared to December of the year before the pandemic.

By region, the Balearic Islands, La Rioja, and the Canary Islands lead the ranking of autonomous communities where home sales increased the most—specifically, by 58.4%, 49.2%, and 42.7%, respectively. According to data from the Notarial Statistical Information Center (CIEN) for the month of November, regions such as Andalusia, Madrid, and the Valencian Community also recorded increases of over 30%. At the other end of the spectrum are regions such as Aragon (8.3%), Cantabria (7.4%), the Basque Country (5.2%), and Extremadura (1.2%).

Housing Price Forecast

The pandemic brought the real estate market to a standstill. While experts had already been predicting price stabilization and a slowdown in the number of transactions months before the lockdown, starting in March 2020, the real estate sector plunged into a period of uncertainty that, for months, was accompanied by a decline in prices and sales transactions.

However, improved public health conditions and a return to normalcy have contributed to the recovery of the real estate sector, which grew by an average of about 2% over the past fiscal year.

In November alone, apartment prices rose 3.8% compared to the same month the previous year, reaching 1,675 €/m². For single-family homes, the increase reached 12.8%, bringing the price per square meter to 1,212 euros. Data from the Notarial Statistical Information Center (CIEN) reveal a 7.4% year-over-year increase nationwide, which, in practice, translates to widespread price increases in 14 of Spain’s 17 autonomous communities.

The Valencian Community (14.2%), Madrid (14.0%), Murcia (13.3%), Catalonia (12.4%), the Canary Islands (12.0%), and the Balearic Islands (11.6%) top the list of regions where housing prices rose the most between November 2020 and the same month in 2021. The increase was less pronounced in Andalusia (9.5%), Aragon (6.7%), Castile-La Mancha (3.8%), Asturias (3.6%), Cantabria (3.0%), Galicia (1.6%), Navarre (1.2%), and Castile and León (1.0%), although all of these regions recorded increases that stand in stark contrast to the declines seen in La Rioja (-22.4%), Extremadura (-7.6%), and the Basque Country (-5.0%).

In any case, the real estate market forecasts for 2022 are in line with the growth trend that began in 2021. Analysts say that delays in the delivery of raw materials, as well as a shortage of skilled labor, among other factors, could be reflected in construction costs. However, real estate experts estimate the uptick at around 4–5 percent—slightly higher than last year but far from scenarios of sharp price surges.

To buy or not to buy, that is the question

Do real estate market forecasts suggest it’s a good time to buy a home?What should you look for when buying a house? Where is the sector headed? Experts are clear on this: it’s a good time to buy a house. The reasons for this can be found, among other things, in how the real estate market has evolved over the past few months.

Price is one of the factors that make now a good time to buy a home. Far from experiencing sharp declines, the real estate market weathered the pandemic with only slight drops, which have now been almost entirely recovered across the country. It is precisely this realization that housing prices will not fall that encourages people to consider buying. In fact, as we mentioned earlier, real estate market forecasts for 2022 point to a moderate rise in prices.

But that’s not all. Demand is growing, fueled by savings accumulated during the pandemic, and—combined with rising inflation—this makes buying a home an attractive option before people lose their purchasing power.

Another interesting factor beyond housing price forecasts is mortgages. Interest rates are at historic lows, which is encouraging many potential buyers to take the plunge and become homeowners. In fact, according to the latest data from the INE, 67.5% of mortgages taken out are fixed-rate loans, compared to 32.5% that are variable-rate mortgages—figures that confirm how the traditional trend in calculating mortgage payments has been reversed.

Where to Buy

There are many factors that can influence the choice of a home. In fact, the pandemic changed buyers’ preferences, shifting the bulk of demand toward homes with outdoor spaces and in areas away from major cities —which, in practice, led to increased interest in single-family homes, a trend that is now returning to normal.

However, from an investment perspective, the gross rental yield can be a good indicator of where to buy. Although it is too early to discuss real estate market forecasts for 2022 in this regard, at the end of last year, the most profitable regions were Castilla-La Mancha (7.82%), Aragón (7.58%), and Extremadura (7.57%), while the Basque Country (4.72%), Castile and León (4.68%), and the Balearic Islands (4.23%) ranked at the bottom.

When it comes to major cities, Murcia tops the list with a gross rental yield of 7.67%, followed by Zaragoza (6.56%), Seville (6.44%), and Las Palmas (6.14%). Vitoria (4.64%), Girona (4.61%), A Coruña (4.39%), and Palma (4.31%), meanwhile, bring up the rear of the ranking as the least profitable cities at the end of 2021.