Market report 2022-2023 Spain and Andorra

The luxury market, more stable in the face of economic and political changes

The scenario of lower levels of sales and, consequently, falling prices, to which the real estate market is heading, will have a lesser impact on the most premium segment. The reason is that the luxury market "moves with rules that are independent of the standard and is more stable to economic and political changes", says Constanza Maya, Head of Expansion & Support Engel & Völkers Iberia, specifying that "the majority of premium transactions exceed 2 million euros and are rarely closed with bank financing".

Although rate rises hardly affect the luxury market, uncertainty does. In this sense, "we observe that since the end of last year, purchase decisions are being delayed due to the current economic situation (high interest rates, soaring inflation, elections, possible economic recession), and more aggressive offers are being made by buyers," says Maya.

The report also shows that demand in the luxury sector has also reduced, but still outstrips supply in large cities such as Madrid, Barcelona, Valencia and Seville, as well as in the best locations on the coast such as Marbella and Mallorca. Once again, foreign demand, both for residential and investment purposes, has been the mainstay of the market, accounting for more than 40% of transactions.

The report, based on our own prices and transactions in Spain and Andorra throughout 2022, also shows the major differences in international demand depending on the area. In Spain, French, Italian and English buyers stand out due to their proximity, with Belgian and German buyers consolidating. "In recent months we have been seeing demand from North American and even Australian clients, due to the favourable exchange rate of the dollar against the euro", emphasises Juan-Galo Macià.

"The dynamism shown in 2022 cannot be maintained this year in the current context of uncertainty. The increase in the cost of financing has caused a large number of national buyers to remain on standby. International buyers, however, will once again be one of the pillars of the real estate sector," confirms Juan-Galo Macià, President for Spain, Portugal and Andorra.

Double-digit growth in Spain and Andorra

According to data collected in the market report, in 2022 house prices rose in all the autonomous communities in which Engel & Völkers is present, with Madrid, the Balearic Islands and Andalusia leading the way. The average cost of properties sold in Madrid grew by double digits for the second consecutive year to 5,570 euros/m2, with four districts of the capital above the 5,000 euros/m2 level.

In Andalusia, the Costa del Sol once again stood out within the growing and constant path of transactions, prices and demand from nationals and, mainly, foreigners, who account for more than 60% of property purchases in Malaga, Marbella, Benalmadena, Fuengirola, Torremolinos, Mijas and Estepona. In many municipalities, these acquisitions are now equally divided between holiday homes and primary residences.

Foreign investment was also the driving force in the Balearic and Canary Islands, as well as in Andorra, where the price of properties managed by Engel & Völkers last year rose by 9.5% to an average price of 4,600 euros/m2, with the parishes of Canillo and Ordino leading the way. The tightening of the Principality's requirements for obtaining tax residency has not affected our operations, because the increase up to 600,000 euros of investment is in line with the profile of our clients.

Rents at record levels

The current context of inflation and rising interest rates, together with the collapse of supply due to the over-regulation of the rental market and the preference of landlords to sell, has pushed prices to record highs. The average rental price has skyrocketed in large cities and coastal areas to reach an average monthly rental price of 2,497 euros in 2022, according to our own data published in our latest market report.

Per square metre, the average rental cost in Madrid and Barcelona has exceeded 20 euros, while in Valencia, despite being the capital where the cost has increased the most, it is still around 15 euros. As with buying and selling, it is worth highlighting the strong presence of foreigners, who account for more than 50% of the transactions managed.

Do you want to know more about the real estate market in Spain and Andorra? download our latest market reportin which we will provide you with all the information on the different markets in which we are present, such as the type of clients, the most sought-after areas, the average ticket price or the most sought-after type of property, among others.