Real estate consultants, appraisers and financial analysts predict a slowdown in the sector in the first half of the year and a resurgence in the second half, given the war and inflation in Ukraine.
The real estate industry has been going like a hit so far. Russia invaded Ukraineinflation got out of control and central banks raising interest rates. Real estate agents, appraisers and contractors are moderately optimistic about the development in 2023, despite the slowdown in the market due to economic uncertainty. Professionals expect the slowdown in the sector to continue in the first half of the year, a slight correction in prices, and the recovery in the second half of the year if the war in Ukraine and inflation take a breather.
Financial analysts predict this interest rates will reach 4% from the current 2.5% in the summer and will start to fall from then on. They also think that asset prices are unlikely to fall as sharply as they did in the last crisis, and they recall that the average cost of housing in Spain is still 18.7% below what was reached during the property bubble fifteen years ago.
Experts agree that 2022 has all the elements to sustain the real estate enthusiasm of 2021.. In fact, investment during the year broke a record, with 35% growth compared to 2021 and 21% growth over the previous market peak reached in 2019, according to consulting firm BNP Real Estate.
The increase is due to Since 2022, good numbers for the first half of the year, important corporate operations have been carried out. In the last quarter, the transfer of Villa Magna and Bless Hotel Madrid hotels between Mexican companies or the investment vehicle created by Mapfre and the German fund Meag and including an office building at Avenida General Perón, 40, came to the fore. Madrid.
Despite these operations, real estate investments started to slow down in the last period of the year. Borja Ortega, CEO of BNP Paribas Real Estate, said, “After a record year in real estate investment, we noticed a slowdown in the last quarter. The macroeconomic situation, high inflation and interest rate hike policies mean that investors are stuck in their analysis.
Of course, we will see an adjustment in valuations to be higher for non-revenue assets such as land.” producers have greater visibility and economic prospects are clearerinvestment activity is not returning to very active levels”.
Adolfo Ramírez-Escudero, head of CBRE in Spain, agrees with the diagnosis. The figures we have evaluated so far show that 2022 is a good year for real estate activity, with an investment volume of approximately 18 billion euros.”
“The year 2023 – continues Ramírez-Escudero – is projected to be a year with lower investment volume compared to 2022. The adjustment will be closely related to the price compliance ratio reflecting the new macroeconomic environment.. We also believe that in 2023 many of the axes of transformation that have begun in recent years will deepen: increased flexibility in digitalisation, sustainability and use.”
country potential
national president of CBRE, Great potential of the Spanish sector for investors. “As real estate in Spain remains attractive to appetite investors, the polarization between the new and old real estate sector will continue to increase.”
in your understanding, It is foreseen that asset management capacity will gain importance and make a difference, and the rate of change and obsolescence of buildings will accelerate.. By sectors, “we will see how the product range continues to expand: data center (data centers), senior living (residence and real estate for the elderly), life sciences (health sciences and pharmaceuticals, looking for offices and health centers) ), agribusiness (olive) agro-industrial assets such as farms), flexible office (flexible offices), last mile (last mile distribution), education, sports and much more,” says Ramírez-Escudero.
Solvia, the former Banco Sabadell real estate services firm now owned by the Swedish company Intrum, He states that the year 2022 is closed with approximately 640,000 housing transactions.Just over 13% from the figure in 2021 (564,569). With a portfolio of more than 150,000 assets under management, the firm warns that the trend towards flat purchases will change in 2023 and predicts 580,000 homes will be sold (20% less than in 2022). “Some levels, however, will continue to be higher than pre-pandemic numbers,” they add from Solvia.
2022 figures for Ernesto Ferrer-Bonsoms, chief operating officer of Solvia Reflect that many buyers wait for the decision to buy a home to avoid further increases in interest rates.. “Although we do not expect a change in trend in 2023, real estate activity will continue to be an important engine for the economy, with levels close to or higher than pre-pandemic levels,” Ferrer-Bonsoms said.
Despite the current economic uncertainty, The developers are optimistic about the change in the cycle, stating that it will have nothing to do with what it was 15 years ago, after the real estate bubble burst.. Juan Antonio Gómez Pintado, president of the Association of Builders Supporters of Spain (APCEspaña), reassures us: “The realities of the real estate sector allow us to remain positive despite the context of uncertainty as we closed the year due to rising property prices, the Central European Bank and rising inflation”.
Proponents insist that major cities should release bags of land and municipalities should speed up building permit processes. “The year 2023 continues with significant challenges for the industry, such as creating the final land responsive to current demand, facilitating access to housing for the most vulnerable, the bureaucracy of the licensing process to reduce deadlines and financial costs, or greater legal certainty. Until next year, developers are already It has marketed 93% to 95% of homes and almost 40% by 2024. It is crucial that we continue to encourage urban developments to control the price of land and increase housing production levels.“, underlines Juan Antonio Gómez Pintado.
interest rates
The main cloud of the sector is the rise in interest rates.. The Financial Users Association (Asufin) predicts that the June 2023 Euribor will already reach 4%; this represents an increase for every 100,000 Euro mortgage, with a margin of 1% just over 2,000 Euros. This additional annual cost will add to the 2,769 euros reached by the 2022 rate increase.
The Unión de Créditos Inmobiliarios (UCI) argues that interest rates may be about to skyrocket. “We’ve seen this in the American market, generally six months ahead, and everything indicates that inflation will begin to moderate throughout 2023 in the Eurozone and especially in Spain,” says Deputy Director José Manuel Fernández. General of the UCI. And adds: “As the economy will cool down and there will be a risk of recession, it is not possible for interest rates to continue to increase”.
The Hipoo mortgage comparator also predicts a easing in interest rates in the second half of the year. Rafael Moral, the company’s head of mortgage analysis, expects 2023 to be a year without strong rises in Euribor, unlike 2022. Euribor will reach peaks close to 3.5% in 2023,” he said.
Moral believes that it is possible for Euribor to slow down and even fall to values close to 2.5% as of the third quarter of the year.. Despite everything, he calls for being cautious about the value of the index due to the inflationary instability in the Euro Zone, and therefore, sticking to the course of the market as the year progresses.
no flats for rent
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The rental market will continue to be stressful in 2023 due to the imbalance between supply and demand.. According to the Idealista real estate platform, stock available The decline of rental housing has not stopped since the end of the pandemic. Last year, the offer was reduced by 25% in Spain, with higher rates in the most dynamic markets such as large capitals.
While the demand from young people and families with no purchasing power continues to increase, the supply of real estate decreases before the houses whose contracts have expired are replaced. Idealista analysts emphasize that the lack of this substitution is mainly due to insecurity. what homeowners think about the difficulty of salvaging a home quickly if not paid.