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Spanish Housing Market Hits Decade-High Prices While Domestic Transactions Wane

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Safak Costu
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An In-Depth Look at the Rising Housing Costs in Spain

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Soaring residential real estate costs

The average cost of residential housing in Spain has reached unprecedented levels, breaking the 2,000-euro threshold per square meter in the second quarter of the year, according to the Spanish College of Registrars. This marks an increase of 1.12% from a year ago and an even more significant leap of 3.1% from the previous quarter. This indicates a substantial surge not only in year-on-year terms but also in the short term.

A decade-high for housing prices

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Presently, the cost of housing in Spain stands at its highest since 2008, starkly reflecting the ongoing economic recovery from the global financial crisis of the past decade. The momentum of this growth is sustained, as the prices continue to skyrocket with no discernable decrease in sight for now.

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The declining mortgage loans and transactions

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On the flip side, an intriguing trend that appears to be emerging in correlation with the escalating real estate prices is the declining number of mortgage loans being allocated. Concurrently, the number of buy-sell transactions is experiencing a downward trajectory as well, suggesting a dual downturn in the Spanish real estate market despite the soaring prices.

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Foreign demand remains robust

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Despite the escalating prices and dampened local market conditions, foreign demand has remained unfettered, maintaining a steady pace of 15%. The leading nationalities dominating this foreign demand include Germans, French, Moroccans, Italians, and Romanians. Their preferred locations are primarily concentrated in areas like the Canary Islands, the Balearic Islands, Valencia, Murcia, Catalonia, and Andalusia.

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Implications for the Spanish Real Estate Market

These trends hold profound implications for the Spanish real estate market and the broader economy. It signals a potential dichotomy between domestic and foreign stakeholders in the housing sector, with potential consequences for Spain's broader socio-economic landscape. The increased scarcity of mortgage loans and the declining number of transactions indicate potential challenges for native home buyers, potentially exacerbating existing social inequalities within the country.

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