Valencia Property Blog

In a property market price depends on many factors. There are the obvious ones such as supply and demand, interest rates and new build numbers but there are also a lot of others that come into the equation on a macro and micro level. It's always risky to make a solid prediction when people are "taking notes" in order to "win the internet" at some hazy date in the future so you should take any prediction in this article with a pinch of salt. Prices could fall... they could also continue to go up. This multitude of factors that affect house prices at any time can even be accompanied by a Black Swan Event* that changes everything. However, multiple factors being to blame for the ongoing housing crisis is a fact, it's not just one thing and because of this all the debate over which one is "really" to blame misses the point. Each one compounds with the others. The result is the same regardless of which culprit you pick from an ideological, political or preferential point of view: prices aren't dropping soon in general and the housing crisis will continue.

A Black Swan event, as defined by Nassim Nicholas Taleb in his 2007 book The Black Swan: The Impact of the Highly Improbable, is an occurrence with three characteristics: it is a surprise to the observer, it carries a major impact, and after the fact people construct an explanation that makes it look predictable or even inevitable in hindsight. Therefore, by definition, they are very difficult to predict with any level of certainty but candidates include the AI Bubble Burst, Russia expanding its new imperial phase or simply a huge uptick in interest rates like in the USA (And of course something that nobody sees coming but would be obvious looking back).

Whether you think the problem of housing is due to the lack of land available to build, tourism, huge demand, immigration, family atomization, the slow pace of permits and licences, cheap credit, a shortage of builders, the lack of alternative investment vehicles, government policy or even pure greed, you're right. But when you pile each one of these factors on top of the others you don't get a house of cards ready to topple, you get lots of reasons as to why things are as they are and why the situation won't be changing anytime soon. Let's look at some of the guilty parties.

Guilty Party 1 - Lack of Building Land

This is especially true in Valencia and Barcelona. The cities are hemmed in: Barcelona by mountains and sea and Valencia by the same sea, the agricultural and protected land around it and the Albufera lake. The city is hemmed into the area inside the new riverbed to the south too and with the DANA two years ago we saw why that was necessary.

It is estimated that up to 96% of the plots in Valencia are already built on (The actual numbers are disputed but it's over 90% wherever you get your information from) And a plot that is already built on will not usually get a greater capacity even if you knock down a building because most places have height limitations so you can only replace what is already there, you can't build a skyscraper where there are currently four floors.

In Europe you can't just create land or move into new lands and territories without committing a genocide. This isn't the Wild West of the 18th and 19th centuries. What is available to build on in the cities is awkward... eg, next to railway lines or motorways, in enterprise zones, individual plots in the Cabanyal for single dwellings but little else.

Political changes may change the ideas but they don't change the geography or reality of this lack of space. Huge amounts of building land are not going to appear any time soon. And even if it did happen then...

Guilty Party 2 - Permits and Licences

Unfortunately the system of permits and building licences not only adds costs onto any developer's bill but also months and, more usually, years to their timelines.

The Valencia specific figures are contested, but estimates go from 180 days for a simple licence to an opposition claim of 725 days on average to close an informe. The council claims of having halved processing times since 2023 still leaves you with an inconvenient fact of a whole year being typical for licences for new builds before you even think about breaking ground and starting the actual work. Remodelling licences are quicker but that is for single dwellings again, not whole buildings, and doesn't put a great hole in the demand.

From the point of applying for a licence to being able to hand over keys and the buyer to move in is commonly several years. You have to think about getting the project drawn up, project approval, licences, construction (18-24 months), and getting the first-occupation licence once finished. Easily three years in total but often longer. Spanish bureaucracy will not ease this time limit very soon and even if it did then...

Guilty Party 3 - Households are Shrinking

According to the National Institute of Statistics in Spain the average household size in Spain is decreasing: It was 4.1 people per household in 1970, 2.9 in 2001, and all the way down to 2.5 in 2024. This despite the fact that it is more and more difficult for young people to get on the housing ladder as prices move away from their savings. It's projected to reach 2.32 by 2039. Projections also estimate another 2.2 million households required by 2041 largely driven by this family atomization and immigration/internal migration. Spain needs immigrants to pay into the social security system and fund pensions as the current population will shrink due to the low birthrate otherwise and it gets internal migration to big conurbations as that's where the jobs are.

However, and even if there were a stable population, more and more smaller households mean more units are needed and dividing current units is mostly not allowed and even when it is we then hit the permits and licences issue again. Planning regulations frown on mini apartments and houses. The regulations of the 60s and 70s are not fit for purpose in the mid 21st century and even if they were...

Guilty Party 4 - Cheap Mortgages Reduce Supply

We've talked about this here before so not to labour the point but owners who fixed their mortgages at 2-3% in recent years have no financial incentive to sell and rebuy at today's rates or to sell and rent.

Spain's share of fixed-rate mortgages has risen substantially since 2016, meaning more existing stock than a decade ago is held by owners insulated from rate pressure because when rates go up theirs stay the same. When they are paying so little and prices are rising so much there is little incentive to sell. Renting out the property more than covers the mortgage repayments as rental prices continue to rise.

So there will be no glut of properties coming onto the market like in 2008 after the financial crisis when mortgage rates soared because the pain is not as apparent. And even if it was...

Guilty Party 5, 6, 7 etc...

The other factors such as large investment funds holding properties, short-term tourism lets taking away property from long term availability, immigration and internal migration to the big conurbations from the increasingly empty countryside (And there are swathes of empty countryside and small villages with plenty of empty houses where building would be possible but nobody wants to live there) or any number of other reasons: Whichever one you want to blame it doesn't matter. Whichever you choose or how you choose to look at them, they all point in one direction. Each of them independently reduces supply or increases demand and when several are happening at once they compound. Even if one of them changes suddenly the other factors remain the same. There is not a single dominant cause to fix, there are several compounding ones, none of which look to be getting resolved any time soon.

The Caveat

We are back to the Black Swan here. "Something" could happen that breaks everything all at once. An expanding European war disrupting energy costs and investor confidence; an AI-driven market crash hitting the wider economy and confidence with it; a sharp recession forcing distressed sales even among owners on cheap fixed mortgages, since a low rate doesn't help if the income to pay it disappears. Any of them could happen and if they all happened at the same time then all bets are off. How likely they are to happen I think depends on your world view. You may think they will, you may think things will keep pottering along.

However... There May Be Signs

Agents are reporting that enquiries are down across the board because prices have gone out of reach for many people wanting to buy (and let's face it online search traffic has taken a huge hit because of AI slop). In terms of properties, anything that is good value compared to everything else on offer still sells straight away but there is stock sitting unsold on the property portals and anecdotally prices are falling in certain areas for certain types of property.

However, as I have said before on these pages there is a difference between "optimistic" and "real" pricing. The original optimists are now reducing their prices. And again, anecdotally there were a lot of optimists in La Cañada it seems where asking prices have fallen by 17% in the last 12 months. In L'Eliana right next door asking prices have risen by 12%. Go figure. More realism in L'Eliana where things continue to sell well?

What To Do

The practical takeaway from this is pretty clear. Unless we get one of the events above or a combination of all of them this isn't a market to wait and see. The constraints are structural and multi-year on every front covered and currently sales of good properties will continue to be very quick so you need to be ready. And even if the Black Swan Events happen the Spanish will not be quick to drop their prices, we saw this after the 2008 financial crisis and in future we may see it again.

However, another thing is still clear. You only live once and if you do wait it out then you may find that the market runs away, your life situation changes and you can't make the move, maybe due to health concerns, family issues or work situation or "something" does eventually happen which moves the needle. If you have decided to make the move then maybe just do it, if not now then when? The lifestyle here is still the envy of most of the rest of the World for a reason. And at Valencia Property we are here to help you all the way. Just fill in the form below with what you are looking for and we'll get back to you so you can start your journey with us.

Property of the Week

Parkside Bargain 350k

If you were to move today’s property 500m closer to the city centre you would be looking at 500k easily. 4 spacious bedrooms, recently renovated and overlooking the Turia riverbed park at 350k. I mean it sounds too good to be true right? Well the reason is exactly that, it’s a little but further afield in the Nou Moles neighbourhood which we’ve mentioned on here before as being a bit of an undiscovered gem rather than the more sought-after neighbourhoods down the road like Petxina, El Carmen or Gran Via.

The buildings around here don’t generally feature the nice façades you’ll find in those areas I’ve just mentioned as they were built back in the late 50’s / early 60’s when the idea of actually trying to have your building look pretty seemed like a waste of time. But to be honest who bloody cares, you’ll be on the inside and looking out at the same views as your uptown neighbours only you’ll be a couple of hundred thousand to the better! You still have direct access to the park on your doorstep, a stroll into the city is 20 minutes instead of 12, the public transport will still get you to all points of the city, and there has been lots of investment put into this area recently to add more green spaces and give it a bit of a makeover.

Come see for yourself, drop us a line and we’ll get a visit arranged for you.

Stepping Stones Rental of the Week

Back in Barraca - Cabanyal

Welcome back to Calle Barraca.

One of our newest apartments is tucked away on Calle Barraca, one of El Cabanyal's most iconic streets. You're just a 5-minute walk from the beach, with great public transport links to get you into the city in no time. Inside you'll find a bright, spacious two-bedroom apartment with a generous balcony overlooking a pedestrian street, the perfect spot for your morning coffee.

Both bedrooms have their own air conditioning, and the recently renovated kitchen is fully equipped with everything you need for a comfortable stay. Travelling with your dog? They're welcome too (Sorry, no cats this time!). Approval depends on size and the number of dogs, so just get in touch for further confirmation.