Withdrawals from mutual funds, shrinking profitability in rental properties, and inflation are pressing on the housing market. Mikel Echavarren, chief executive officer of real estate consultancy Colliers International, told Valencian developers that the sector faces a sharp downturn. Speaking at the opening of the Urbe real estate fair, Echavarren urged industry professionals to temper optimism amid concerns that the international economy remains fragile and investment funds have adopted a cautious stance.
The consultant highlighted that inflation remains the dominant challenge. He noted that higher interest rates projected for next year would burden Hispanics with variable-rate mortgages by about 12,000 million euros, while inflation could total around 40,000 million euros. The combined effect would curb household spending, reduce demand for new homes, slow purchases of affordable housing, and force some households with limited resources to consider selling their properties.
Ignacio Pareja, managing partner at Momentum Reim, described investor capital as effectively paused. The crisis in the United Kingdom is severe, and there is broad uncertainty about market sentiment. Pareja pointed out that British and American funds have historically been a key driver of real estate investment in Spain and in the Valencian Community, a dynamic now under pressure.
build-rent
A second pressure point is the build-to-rent segment, which is expanding as large numbers of people cannot access home ownership. The leaders of Momentum and Colliers warned that profitability for rental projects has fallen and that interest from major operators has cooled. The math simply does not add up anymore, creating a real challenge for developers.
Pareja emphasized that the industry will bear the brunt of the downturn. The erosion of household confidence, combined with higher interest rates, is expected to dampen purchasing power. Housing buyers are increasingly from the upper-middle income bracket, yet inflation costs bite across all income groups, affecting overall demand and sentiment.
no sun
A separate concern comes from land supply. Alejandro Escribano, associated with Valencia’s urban planning history, warned that developable land is scarce. Market demand could outpace supply within the next year and a half. One of the industry’s burdens is the lag in processing licenses. To accelerate approvals, there is a call to simplify construction law, review the current General Plan, which has remained largely unchanged for years, and optimize land use practices that have become entrenched over time.