Bankinter Raises Forecast for Spanish Real Estate Prices

Financial group Bankinter has revised its forecasts upward regarding the growth of residential real estate prices in Spain. According to the bank, housing costs will continue to outpace inflation in the coming months. It anticipates that prices could rise by more than 8% in 2024 and around 5% in 2025.

Previously, Bankinter had predicted a 6% increase for this year and a 4% rise in 2025, meaning the new estimates exceed the old ones by two and one percentage points, respectively. After this period, the bank expects a gradual slowing of price growth.

“Later on, the rate of increase should moderate, standing above 3% in 2026, and gradually converging with inflation at around 2% by 2027,” the Bankinter analysts explain.

Key factors supporting Spain’s property market include expected interest rate cuts—which will stimulate buyer interest—alongside a solid labor market, limited housing supply, and a surge in rental prices, which have climbed approximately 11% so far this year.

Regions with the Highest Price Growth
Experts at the bank note that the greatest price hikes are expected in major cities, along the Mediterranean coast, and on the islands. These areas benefit from population concentration and robust foreign demand.

According to the Spanish National Statistics Institute (INE), between 2022 and 2037, the population in regions like the Balearic and Canary Islands, Murcia, Madrid, Catalonia, and Valencia could grow by more than 13%. Foreign buyers already account for one in every five property purchases in Spain, and their purchasing power often surpasses that of local buyers.

No Signs of a Real Estate Bubble
Despite the ongoing price rally, Bankinter sees no indication of a new housing bubble forming.

“After a decade of continuous price increases—since 2014, values have risen by roughly 56%—some wonder if a new bubble is emerging. Our view is that it is not. The Spanish housing market has solid fundamentals,” the Bankinter analysts state. They highlight improved affordability metrics compared to historical averages, reasonable debt-to-income ratios, and limited supply—a stark contrast to the oversupply that characterized the previous bubble.

Positive Outlook for Listed Real Estate Companies
Bankinter forecasts a positive trend for publicly traded real estate companies. Among the “buy” recommendations are firms linked to economic cycles, including Vonovia, Colonial, Merlin Properties, and developer Aedas Homes.

At the same time, the bank maintains a positive outlook for companies with structural growth potential, such as Prologis, Welltower, and Digital Realty Trust, focused on logistics, healthcare, and data centers, respectively.

Bankinter estimates that moderate economic growth, inflation above 2%, and further interest rate cuts will create a favorable environment for real estate investments up to 2025.

The attractiveness of certain segments—offices, shopping centers, and the residential rental market—is bolstered by interest in companies like Colonial, Merlin Properties, Aedas Homes, and Germany’s Vonovia. Additionally, the tourism boom continues to drive strong hotel demand despite geopolitical tensions.

Bankinter sees significant upside potential in the stock market for several real estate heavyweights. For Colonial, it predicts a 33.2% increase (targeting €7.3), for Lar España a 0.5% gain in the context of Helios’s takeover bid (€8.3), for Merlin Properties a 16.6% bump (€12.2), and for Aedas Homes a 13.7% rise (€29).

In contrast, Bankinter recommends selling Metrovacesa (despite a projected 2.9% gain) and Neinor Homes (with an anticipated decline of over 3%).

Structural growth assets, benefiting from favorable demographic and technological trends, include Welltower (healthcare facilities, particularly senior housing), Prologis (logistics properties), and Digital Realty Trust (data centers).

For investors who prefer collective investment vehicles, Bankinter suggests considering the “Janus Henderson Pan European Property Equity Fund,” similar to the “JH Global Property Equity Fund” already in its portfolio.

Information prepared based on data from idealista.com.