Fitch Ratings has forecasted that home prices in Spain will grow at 3% to 5% in 2022, compared with an estimate of 4% in 2021, before softening growth in 2023. 

The firm reported: ‘Single-family homes, which account for about 30% of transactions, will be the driving force behind this trend. As of July 2021, this segment had risen 16.5% y-o-y compared with a modest 1.8% for flats. Home price gains are driven by a competitive lending environment and a persistent supply shortage.’ 

Even though Fitch expects a gradual recovery in terms of building permits, this shortage is a long-term supply constraint as the required time to obtain all the permits for a “ready to build” plot of land in Spain is already more than five years. Fitch forecasts Spanish GDP to continue growing at more than 6% in 2022, with the unemployment rate falling to 13.9% by 2023. 

The firm added: ‘Additionally, we anticipate the low-interest-rate environment and prudent origination practices to persist. Most new borrowers are shielded against potential Euribor increases as recent origination has been mostly linked to fixed-rate loans with an average coupon of 2.4%. On the other hand, seasoned loans with a variable rate carry very low average LTVs, in the 50% range. We do not expect a large number of forced sales as most lenders prefer borrower-friendly solutions instead of repossessions.’