Stress test for Spanish banks rules out a disaster in the real estate sector

The European Banking Authority (EBA), the body responsible for the smooth functioning of the banking sector, created by the European Central Bank after the bursting of the housing bubble, launched a new stress test. These tests Measuring how all banks in the eurozone will resist an unfavorable and unpredictable macroeconomic situation.

“These tests after the pandemic were very important because this unforeseen event would have an impact on the income statements of banks. 2021 was a transition year when the economy started to recover. However, things went wrong in 2022. First, an unexpected war breaks out, then raw material and supply tensions rise, inflation rises. and central banks have to take precautions, the most important thing is to raise interest rates, which have been at zero for years, this is the most logical thing. They measure, but they know that It will have an impact as it will disrupt the growth of countries.“Summaries Julián Salcedo, president of the Real Estate Economists Forum at the Madrid College of Economists, about the context in which these tests were conducted.

In the worst-case scenario of these tests, the European Banking Authority asks Spanish banks what would happen if the gross domestic product of the next three years (2023, 2024 and 2025) fell by 5.4% and unemployment rose to 18.5%. and inflation closed this year with 9.6%. “The scenario of these forecasts is much less negative for Spain than for other countries in the region. European Union”, confirms Salcedo.

What about the house?

Bank inspector diverges residential real estate pricescorresponding to housing prices, commercial real estate pricesIt brings together office buildings, commercial assets and logistics warehouses. In the case of housing, in the most positive scenario of the stress test, prices will rise nominally by 2.7% in 2023, 1.2% in 2024 and 1.0% in 2025; compared to the 7.3% who have historically done so. In any case, housing prices will not rise in real terms with an inflation rate of 4.9%, like the 2023 forecast of the Bank of Spain.

“The growth in housing will be very moderate and regress until 2025 in a positive scenario. But you have to play with the number of transactions, not just the price. In 2022, 720 thousand sales were recorded, the data is the highest since 2008. In 2023 and 2024 this number will drop significantly by at least 20%“, explains the chair of the Real Estate Economists Forum at the Madrid College of Economists.

In the worst scenario, flat prices are 6.5% in 2023, 12.8% in 2024 and 1.2% in 2025; A previously complex situation that would mean a radical worsening of the Spanish and world economy.

How will the rest of the real estate assets behave?

offices, buildings, shopping malls and logistics warehouses brought together under one roof commercial real estatewill grow between 1.3% and 1.4% in the next three years in an optimistic position. “Worst-case scenario too optimistic because the main companies calculate that there will be a 15% or 20% decrease in prices. But even if prices increase by 1%, real prices continue to fall with inflation,” analyzes Julián Salcedo.

In the negative scenario, a decrease of 14.3% this year, 10% next year and 3.7% in 2025 is predicted. describe what’s on the market today. In parallel with this, as in sales, the corporate investment volume will be reduced by 30% to 50% this year.

Spain vs Europe

In all scenarios, across all asset types, Spain is showing resilience with higher gains or lower declines against the European Union. The worst performing countries in the housing market were Sweden, Bulgaria, Denmark, the Netherlands and Poland.. These countries are planning slight decreases if the economy is doing well, and double-digit increases if the situation worsens. There are interesting cases like Hungary, where if all goes well they will grow strong, but if things go wrong they will fall the most in the whole of the Old Continent; expresses great volatility and dependence on world markets.

Generally, The rest of the international real estate assets hold their value at nominal rates as long as the favorable scenario is met.; however, strong declines are expected if the economy shows worsening in inflation and country growth.

Source: Informacion

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