Good news for investors: Supply of homes in Spain decreases (and value increases)
Estimated reading time: 5 minutes
Table of contents
- Declines in supply in capitals
- Offerings in the provinces
- Impact on house prices and value on the Costa del Sol, Tenerife and Balearic Islands
- New construction vs existing homes
- Conclusion
The supply of homes in Spain fell 4% last year. As many as 42 Spanish capitals currently have fewer homes on the market than a year ago. In this blog, we discuss its impact on the overall Spanish real estate market and the opportunities it presents for investors.
Declines in supply in capitals
42 capitals experienced declines in housing supply. The supply of homes for sale in Spain decreased 4% in the third quarter of 2023 compared to the same quarter last year. This is according to a survey published by idealista, Spain’s largest real estate portal.
Most of Spain’s county capitals now have fewer homes for sale than a year ago, although there are 9 where available supply has increased. The largest decreases occurred in Cuenca (-34%) and in Ávila (-30%). This is followed by declines in Huelva (-20%), Santander (-20%), Valencia (-20%), Toledo (-19%), Soria and Tarragona (-18% in both cases).
Of the major markets, supply also decreased in Alicante (-15%), Palma (-11%), Barcelona (-10%), Málaga (-3%) and Madrid (-1%). Supply grew slightly in Bilbao (2%) and Seville (5%).
In addition to these two cities, the supply of homes for sale grew in seven other cities, with Córdoba and Pamplona leading the way (10% in both cases). They are followed by Huesca (9%), San Sebastián (8%), Zaragoza (5%), Cadiz (5%) and Badajoz (3%). In Vitoria, the stock of homes for sale has remained stable over the past year.
Offerings in the provinces
At the provincial level, the situation was similar last year, although fewer provinces increased their available housing stock. Cuenca records the biggest drop in supply, with 18% fewer available homes than a year ago. They are followed by Santa Cruz de Tenerife (-17%), A Coruña (-16%) and Ávila (-15%). Below are the decreases in Soria (-14%), Lugo (-14%), Cantabria, Segovia, Valencia, Teruel, Zamora and Huelva (-13% in the 6 cases). In the province of Malaga, there was a 4% decrease. In the Madrid region and the Balearic Islands, supply remained stable, while in the province of Barcelona it increased by 3%. Guipúzcoa, in turn, has seen its stock of houses for sale grow by 9%, followed by Vizcaya (4%), Albacete (3%), Cordoba (3%), Zaragoza (3%), Alicante (2%) and Seville (1%).
Impact on house prices and value on the Costa del Sol, Tenerife and Balearic Islands
To discuss the impact of these changes in housing supply, we focus on the three regions in which Investinspain operates: the Costa del Sol (Malaga province), Tenerife and the Balearic Islands.
Costa del Sol
The supply on the Costa del Sol fell by 4%, which combined with growing demand could cause price increases (and thus value increases). Although the decline in supply is small, the trend of continued price increases in the region continues. In itself, this is not bad news, as these price increases will continue even after you buy a home, increasing the value of your home. So the region still lends itself very well to real estate investment!
Tenerife
Tenerife experienced the second largest decline in property supply in all of Spain. And this while the supply on the island has never been huge anyway, despite the island’s high demand for second homes, thanks to its mild climate. This high (and rising) demand for housing (combined with low and falling supply) makes Tenerife a true real estate hotspot for investors. The increasing value of a property combined with the great rental potential promises very nice returns.
Balearic Islands
Real estate supply in the Balearic Islands remained stable. The current relatively low supply combined with high demand still make the archipelago very suitable for real estate investment. Rental opportunities on the islands are also great.
New construction vs existing homes
It is important to note, however, that the above figures take into account both new construction and existing homes. Mainly on the Costa del Sol, a wide variety of new construction remains available, giving investors plenty of choice there despite declining supply.
Conclusion
Housing supply declined across almost all of Spain in 2023. While this makes it harder to find affordable housing, it also presents opportunities for investors and landlords. Regions where supply has always been limited and where demand is high (and continues to grow) seem especially promising. Thus, the regions in which Investinspain operates (Costa del Sol, Tenerife and Balearic Islands) remain enormously promising for real estate investment even during these latest evolutions.
