Evolution of the Mortgage Market in Spain: Continuous Decline in 2023
The mortgage market in Spain has experienced a continuous decline in the second quarter of 2023, marking the fourth consecutive quarter of decreases. According to recent data, a total of 93,557 mortgages for homes were registered during this period, representing a significant decrease of 14.5% compared to the previous quarter. This downward trend has intensified, as in the first quarter of 2023, the decline was 2.4%.
This decrease in mortgage activity has been more pronounced than the drop in the number of home sales, which decreased by 5.6%.
The primary reason behind this decrease in mortgage activity has been the rise in interest rates, leading to a lower percentage of home purchases being financed through mortgages.
In the last quarter, the percentage of purchases with mortgage financing dropped by 6.4%, reaching its lowest level since 2014, at 61.6%. This means that a high percentage of buyers chose to acquire properties without mortgage financing, accounting for 38.4% of purchases.
Mortgages in Spain 2023 in Different Regions
Regional differences in mortgage activity are significant, with autonomous communities such as the Basque Country and the Community of Madrid exceeding 80% in mortgage financing, while eight other communities fall below 60%. Home prices also influence the need for mortgage financing.
In terms of year-on-year trends, the downward trend in mortgage activity persists, with a total of 431,747 mortgages in the last twelve months, marking a 4.4% decrease compared to the previous year. This means that approximately 31.58% of home purchases in the past year were made without mortgage financing. Most autonomous communities experienced year-on-year decreases in mortgage activity.
It is expected that this downward trend in the Spanish mortgage market will continue in the coming quarters.
Foreign Mortgage Market in Spain
On the other hand, in the foreign mortgage market in Spain during 2022, a significant increase in the acquisition of mortgages by foreigners was observed.
In previous posts, you will find information about property purchases by foreigners.
Over 30,000 mortgages were recorded, representing a 33% increase compared to 2021 and a 30% increase over 2019, before the pandemic.
Additionally, the number of property purchases made by foreigners in Spain has steadily increased over the past few years, reaching nearly 90,000 transactions in 2022.
In 2020, the proportion of mortgaged homes to homes purchased reached its peak, with two out of every five properties acquired by foreigners financed through a loan. However, this proportion decreased in 2021 and continued to decline in 2022 due to the rise in interest rates imposed by the European Central Bank, making loans more expensive.
Foreigners buy properties and apply for mortgages all across Spain, but their presence is more prominent in coastal areas. Catalonia, Andalusia, and the Valencian Community recorded the highest number of mortgages for foreigners in 2022.
The demand from international buyers in the Spanish real estate market may persist in 2023 despite the overall market slowdown. Foreign buyers, especially non-resident ones, are showing more resilience compared to domestic buyers at this time.
Regarding financing, foreign buyers tend to use more of their own resources to acquire properties in Spain compared to mortgage financing. In 2022, foreign buyers accounted for 13.75% of all purchase transactions, but their mortgages represented only 6.58% of the total.
Furthermore, mortgages taken out by foreigners typically have a higher average amount than those of nationals. The average credit for non-resident foreigners is 171,000 euros, which is 19% higher than that of national residents, and they tend to purchase more expensive properties per square meter.
Romanians are the ones who request the most mortgages to buy properties in Spain, followed by Moroccans, British, Italians, and Chinese.
If you would like more information about mortgages in Spain, feel free to contact us!