this rapid rise interest rates raise uncertainties around housing market in spain. Real estate research services are starting to review forecasts based on the ECB’s recently released forecast models, which predict a 9% drop in prices and a slowdown in operations (-15%) in two years. While these forecasts are being revised, analysts have already predicted a moderation in the rise in prices for this year and next, and refuse to accept the increasingly plausible possibility that prices will fall. The latest work presented by Solvia He points out that “housing prices will slow their growth by the end of 2022 with increases of 3% to 5%”. These percentages are optimistic, as prices rose 2.4% between April and June 2022, compared to 3.1% in the previous quarter. In the second quarter, trading volume was down 0.2% quarter-on-quarter, “indicating a slowdown in signature intensity over the rest of the year.”
the idea of price moderation and lower trading activity The majority of professionals rely on protection, but the rise in interest rates will have a deeper-than-expected impact on both prices and purchasing decisions. According to the aforementioned Solvia study, while the number of operations decreased in 28 provinces compared to the first quarter of 2022, it closed the first quarter of the year with an annual growth of 19% in approved residences. The change in trend is striking.
“The real estate market maintained its dynamism until the second quarter of 2022 with much higher transaction and purchase prices compared to last year. However, the current economic context indicated by inflation, increase in rates or lack of housing stockAccording to the Solvia report, the stabilization of the increases in these two variables caused the first hints of the end of the year to show at more moderate levels,” explains Solvia. However, fears among sales and purchasing professionals already know that we should pay attention to whether a possible slowdown in sales and prices due to further rate hikes is confirmed. New mortgages signed in October will be over 2.5% and with a fixed interest rate below 3% it’s hard to get one signed.
Confidence in soft landing
Although the increase in housing prices in the second quarter was felt by 8.3% on an annual basis and even by 2.4% on a quarterly basis, a slowdown has already begun to be seen. For Jose Luis BellostaSolvia chairman, the situation is not so worrying: “Although the dynamism in the first half of the year was moderate due to economic uncertainty, prices will continue to be positive, especially in the second-hand market. Also, we have to take into account another factor: the supply is not yet able to meet the current level of demand, which is CaixaBank Research, CaixaBank’s study service, also defended the non-alarming messages.
The cities of Madrid and Barcelona are once again among Spain’s three most expensive capitals, just below San Sebastián.. With an annual price increase of 11.3%, Madrid is above the national average and at 3,492 euro/m2, close to Barcelona’s 3,564 euro/m2, where housing prices have increased by only 3,564. % year year.
active shelter
In the context of predictable moderation and even a possible decline in these prices, the industry continues to rely on the economic uncertainty that will lead the most cautious savers to look at housing as a haven asset. Some real estate companies are beginning to perceive this trend, with clients devoting their savings to the purchase of affordable homes and the possibility of renting as a way to hedge themselves against inflation.
“Investing in Housing allows you to hedge savings from inflation through a real asset that has no volatility and does not require knowledge of other types of investments. And if we add the rental income to this, Housing investment is probably one of the best options. Also, inflation and the prices of all kinds of products and materials. increases can only herald new real estate increases,” he says. Duke of JesusPresident of Alfa Inmobiliaria.
Difference between inflation and rates
Some economists also argue that real estate acts as a safe haven.Understanding that the difference between the price of money and inflation is wide, it is necessary to look for robust assets that can provide returns in times of high inflation. Buying a house to rent can be a solution to rising interest rates and persistent inflation.. However, experts advise in no case to face less than 60% of the purchase price when buying a house. Considering the high price of the materials, major remodeling is also not recommended. Jesús Duque’s first advice to anyone considering this idea to protect their savings by buying a house is to minimize their debt. Second, they thoroughly examine the location of the property and examine whether its properties are in line with the demand of the rental market. Always avoid assets in buildings with poor construction or maintenance that will complicate your market entry.