House prices will continue to rise over the next three years

Bankinter has revised upwards its forecasts on how house prices will evolve in Spain. According to the bank, house prices will continue to rise above inflation in the coming months, with an increase that could exceed 8% in 2024 and that will be around 5% in 2025.

Until now, Bankinter had forecast a rise in house prices of 6% this year and 4% in 2025, two points and one point below its new calculations. From then on, however, it expects a moderation of the market. "The increases should then gradually moderate, reaching above 3% in 2026 and tending to converge with inflation at levels close to 2% in 2027," the bank details.

According to Bankinter, the interest rate cuts will act as a "new stimulus", in addition to a "solid" labour market, a shortage of supply and a "strong" increase in rental prices, around 11% so far this year.

In this sense, the bank's analysts point out that the areas with the greatest price increases will be large cities, the Mediterranean coast and islands, due to the concentration of population, as well as foreign demand.

According to the INE's population projections, the population could grow by more than 13% in relative terms between 2022 and 2037 in the Balearic Islands, Murcia, the Canary Islands, Madrid, Catalonia and the Valencian Community, while foreigners buy one in five houses in Spain and their ability to pay far exceeds that of the national buyer.

It rules out a real estate bubble

Thus, despite this bullish context of prices, the bank rules out the possibility of a new real estate bubble forming. And it is blunt in this regard.

"After a long cycle of rising house prices, of 10 consecutive years, in which it has accumulated an appreciation of close to 56% since the lows of 2014, one of the main doubts is whether a real estate bubble is forming again. Our opinion is that it is not. The housing market in Spain has solid fundamentals," argue the Bankinter analysts. And they highlight, for example, "accessibility ratios better than the historical average", as well as "effort rates at reasonable levels and tending to moderate", and a "shortage of supply", which "contrasts with the clear excess of supply of the last real estate bubble".

Good prospects for the listed real estate sector

The entity sees good prospects and opportunities in the real estate sector for the next year, while it has incorporated into its 'buy' recommendation companies more closely linked to the economic cycle. Likewise, the entity has stressed in its latest report on the real estate sector that it maintains this same recommendation for real estate companies with structural growth.

Going into detail on the valuation of listed real estate, Bankinter has stated that its positive outlook until 2025 is based on moderate, but positive, economic growth; an inflation rate still high at levels above 2% and the continuation of the process of interest rate reductions.