Inflation is negatively affected in the housing market, which will start to slow down in the second half of this year and will worsen in 2023. “We expect 2022 to close with a set of transactions 2.3% higher than 2021 and this is 2023 ends with a series of purchases 15.4% less than 2022”, He draws attention to the ‘predictive study of the performance of the residential market in Spain’ prepared by Fragua by Atlas Real Estate Analytics.
The first half of 2022 started on a positive note. Between January and June, 311,900 purchases were made, exceeding the purchases made in the same period of the previous year. If the pace is maintained, the macroeconomic situation will slow this evolution and the year will end in a similar fashion to 2021, though more than recorded in 2021.
The same will happen with prices. “Price evolution shows greater inertia than sales volume. The average price for 2022 will be 2.9% higher than 2021, while 2023 will end with a 0.9% drop.”. Despite the correction, this is a stabilization in the middle of the uptrend. Prices remain within a so-called normal range, unlike what happened when 11 quarters were chained off-chain between 2006 and 2008.
“While it is true that the overall impact of 2022 cannot be measured, a comprehensive ‘time series’ analysis does not reflect that the price reached between 2021 and 2022 is an ‘outlier’, but rather maintains a natural trend that started in 2020 due to the increase in housing demand”, by Atlas They explain from Fragua.
The average housing price in Spain is 1,734 Euros per square metre. This means that a 75 square meter apartment costs around 130,050 Euros. This represents a 5.7% growth between 2020 and 2022. “This increase does not appear to be related to overheating of the trading market. Current prices are in the normal range of prices relative to the previous market trend,” the study says. In 2007 and 2008 the average price exceeded 2,000 euros per square metre.
Increase the average mortgage
In parallel, the average mortgage amount requested to buy a house is approaching 143,000 euros. In the middle of the bubble, the average indebtedness exceeded 150,000 euros. Despite everything, A mortgage crisis does not appear in Spain because the mortgages to sales ratio is still below 1, at 0.69. This means that only 69 out of every 100 real estate purchases required financing, while 200 loans were issued for 100 purchases in 2011.
“Households are in a much more relaxed situation. Household indebtedness is significantly lower than in the first decade of the 2000s, making it a much healthier starting point in the face of a possible recession. In addition, the average mortgage value remains below the maximum reached in 2007”, the report states.
decrease in supply
One of the highlights of the Atlas Real Estate research is, Huge drop in the supply of 640,700 homes for sale. As a positive fact, they point out: “A drop in supply has a positive effect when there is lower demand in the market due to a recession: a drop in demand will be offset by a decrease in available stock. Unlike 2008, when low demand and high supply were together. This allows the market to face controlled slowdowns rather than strong changes in house prices.”
The average time from when a seller hangs the ‘For Sale’ mark to closing the trade remains constant at 130 to 150 days. “The combination of the decline in current stock, a slight increase in lead times in some of the country’s main markets, and the effects of inflation and construction costs in new construction allow us to anticipate a cooler market in the months ahead,” concludes the Fragua by Atlas report.