Las grandes capitales pierden fuerza

In recent years, real estate prices have skyrocketed in major cities, while rental rates show signs of exhaustion. Despite the fact that price and rental increases over the past years have outpaced wage growth during the same period, the property market continues to surge due to a simple reason: the formation of new households has tripled new home creation in recent years, leaving a shortage of 700,000 homes to meet the market deficit.

Specifically, home prices rose by 14.7% in the third quarter compared to the same period last year, with increases of up to 22.9% in Soria, while rents increased by 3% annually in September, according to real estate valuation firm Tinsa by Accumin, with jumps of up to 21.4% in Palencia. However, the rental market begins to show signs of exhaustion in some major cities, such as Madrid and Barcelona.

Home purchases have been affected in recent months due to the already skyrocketed prices after strong increases in previous years, compounded by the rise in Euribor this year and the lack of savings among many potential buyers, reducing potential demand. Nevertheless, this does not prevent prices from continuing to rise due to the very limited supply.

Particularly, homes with features most sought after by demand in recent years, prioritizing spacious areas, ample natural light, and thermal and acoustic insulation over central location, are in high demand. This shortage mainly exists in Spain Vacía, after years of minimal new construction, which explains why the biggest price increases are concentrated in small provincial capitals, with a few exceptions.

Specifically, Soria leads the price increases among provincial capitals in the third quarter of the year, with a 22.9% increase compared to the same period last year, followed by Albacete (19.9%), Santander (17.4%), Ciudad Real (16.2%), Oviedo (16%), A Coruña (15.5%), Guadalajara and Girona (15.3% in both cases) and Las Palmas de Gran Canaria (14.9%).

However, beyond these cities, the majority of capitals show price increases below the national average, meaning the surge has moved to smaller cities on the outskirts of capitals and beyond, due to the increasing prevalence of remote work. Among major and medium-sized capitals, there are exceptions to this trend. For instance, Valencia and Alicante continue to show quite intense increases, of 14.2% in both cases, followed by Málaga (13.8%), Madrid, Sevilla (12.9% in both cases) or Zaragoza.

However, the general trend is that small cities are taking over from major and medium-sized cities. Moreover, these increases are also spreading to the outskirts of major cities, satellite towns, and other municipalities of lesser size that have gained renewed appeal due to employment creation, such as Sagunto in Valencia (up 25.7%), Viladecans in Barcelona (24.8%) or Coslada in Madrid (19.5%).

Conversely, rents have moderated significantly in recent months, registering an interannual advance of 3% in September, according to Fotocasa data. The double-digit rental increases over the past years, which have tripled wage growth, have weakened purchasing power, curbing price increases and causing some declines, especially in major capitals.

For example, rents in Madrid capital have slowed by 0.1% annually, while in Barcelona they fall by 0.7%, figures that contrast with the much higher increases in Palencia (21.4%) or Tarragona (21.2%). Apart from the disparity between salaries and rents in recent years, two reasons explain this slowdown and the shift of price hikes towards smaller cities.

On one hand, due to legal uncertainty, owners prefer to rent their property to someone they trust, even at a lower price. On the other hand, more and more immigrants seek work in Spain Vacía, which has caught them off guard with the pace of new construction.