HE increase in interest rates undertaken by the European Central Bank. reducing inflation in recent months, now more questioned by the unleashed banking crisis, changing the economic cycle Spanish real estate industry. Most of the data is predictable slowdown sales and price adjustment at the end of the year. The amount of adjustments will literally vary by neighbourhood, as average indicators in no economic area are as misleading as in real estate.
Ferran Fontresearch director pisos.com. “Prices are rising on average 5%, and for next year these increases will be modest, up to 2 or 3%. They will fall more in rural areas or small towns and less in large capitals,” says this expert. However, there is no consensus on how to predict the rise in interest rates or what the evolution of real estate sales and prices will be.
Focus on second hand
For cervihabitatLast year, “many purchases were made in advance for fear of not obtaining an attractive interest rate. There was no cooling in 2022 and it is not expected that the trades will be adversely affected in 2023. With the desire to invest its capital in defense assets, the residence was once again given a privileged role. The residence is located in consolidated locations. and will focus on the second-hand market, which allows buying at a more adjusted price and has a higher profitability impact.”
Another result from Servihabitat is that “lease option will gain weight in 2023 in the face of a demand that may delay the option to buy” due to insufficient supply and increased cost of housing loans.
The real estate lobby is strong, and the (unwarranted) popular certainty that housing is a safe asset in difficult times may somewhat dampen the impact of the sharp rise in mortgage prices. In practice, after the current banking crisis UBS’s acquisition of Credit Suisse, A decline in Deutsche Bank’s stock market or bankruptcy of US entities could halt the rise in rates and Euribor, and also encourage home buying as a haven asset.
hard to sell
According to the National Institute of Statistics (INE), although the real estate register showed a 6.6% year-on-year increase in operations in January, the highest in a January since 2008, real estate companies may have increased interest rates on property sales or he already realizes that there are more difficulties due to uncertainties. This statistical break does not seem to consolidate throughout the year.
the reason is that The rapid rise in interest rates has so far been much higher than expected.. And housing prices are already stagnant and starting to decline in some areas. “The accumulated erosion of inflation in households’ purchasing power and the increase in the cost of financing are limiting overall demand, especially in low-income households,” explains Cristina Arias, director of Tinsa’s research service. Font notes, for example, that as a result of the purchasing power of potential customers, prices have dropped in Barcelona neighborhoods like Nou Barris or Sant Andreu, but resisted in Sant Gervasi. Notaries noted a 14.3% year-on-year decline in housing loans in January, and this trend is expected to continue.
CaixaBank Research’s forecasts last year clearly pointed to a slowdown in the industry, but failed to clearly reveal risk percentages. from Judith Monturiol CaixaBank ResearchThe rate increase was expected to moderate trading, but excluded price drops. But the steep rise in ECB interest rates made mortgage loans more expensive, doubling the monthly payments due, breaking the confidence of many families. This unexpected increase in the household mortgage effort ratio stifled some of the demand.
“We will be in it in 2023” negative activity rates Certainly. It is obvious that a record growth in sales is not possible and unsustainable due to the increase in interest rates and the inflation environment,” said Font, underlining that the real estate sector will not collapse in any case: “A 15% decrease in activity is possible and this means 550,000 transactions at the end of the year, which means that the real estate sector will not collapse in any case. level,” he says.
foreign investment
This foreign investment It has emerged as one of the most important factors that will alleviate the recession in the sector. Inflation has been higher in the rest of Europe in recent months than in Spain. And in the real estate sector, the Spanish offer is very competitive in price for investors from other countries. Real estate companies point to Latin American investors’ demand for real estate in Madrid and Barcelona, which maintain relatively attractive prices compared to cities like Paris or London. Foreigners account for more than 15% of sales in Spain, but this rate is once again misleading, as in certain regions such as Alicante, parts of the Mediterranean coast or the Balearic Islands where actual sales have an impact it exceeds 40%. Prices for property investor abroad are alarming, as agreed by the Balearic Government, which promotes control measures for property agents specializing in selling to foreigners.
HE rental market This is a big challenge in a situation where there are fewer activities and higher prices. “In Barcelona, for example, this is a big challenge as the supply of rental housing has decreased by 20% while prices have increased by 20%,” Font says. But the real estate lobby (mainly real estate and landlords) point out that a price cap would be “inefficient and difficult to enforce,” despite adopting tools to assess the evolution of rents to collect in each market. beyond the relationship between the valuation of property and the development of interest rates.
According to the March data of Spotahome, a medium and long-term rental platform operating in 28 countries, room rental prices in major European cities increased by 8% overall. Despite the feeling that the situation is a clear price bubble, the reality is that it costs half as much to rent a room in Madrid or Barcelona as in European capitals. As in the worst years of the last century, when the solution is to rent a room in shared flats, Dublin, London and Munich are the European cities where room rents are the most expensive. Four Spanish cities (Vigo, A Coruña, Murcia and Oviedo) are among the 10 cheapest cities on average.