When choosing a new home and deciding whether to buy or rent it, many factors come into play, often not obvious, which can easily tip the scales in one direction or another, depending on the time and situation. Considering the residential real estate market in Spain in 2023, what can the analyst tell us about the choice between buying and renting?
First of all, when talking about buying, the idea of opening a mortgage loan pops up. In this case, it is worth paying attention to the rates and conditions that banks are currently offering. Mortgage rates in Spain directly depend on the current policy of the European Central Bank (ECB). So far, the regulator maintains its intention to raise the key rate further and the Euribor index may grow up to 4%. However, the situation overseas, in the United States, can significantly change the ECB's attitude to lending rates.
First of all, it is worth looking at the situation in the global economy: it directly and indirectly affects several factors at once, including not only mortgage rates, but also the growth of demand and prices in real estate markets. For example, the unfolding situation with a new increase in energy prices, this time provoked by a reduction in production in OPEC countries, will play a big role.
The problem of the stability of the dollar and its relationship to the euro also did not disappear, the problem of default hung over the United States at all. We have problems in the banking sector, as evidenced by the American SVB and Swiss Credit Suisse. And we must not forget about the problems specific to the European real estate market: a shortage of labor, a shortage of building materials, a drop in incomes and savings of the population, which leads to a decrease in domestic consumer demand.
In general, if we are talking about buying real estate, then at the moment it is definitely worth saying that the situation is extremely uncertain. There are either already obvious problems, or a lot of potentially negative factors that make it not the most reliable decision to buy a home, whether at your own expense or through a mortgage. It does not matter whether you want to buy a house for personal needs or as an investment.
What remains? A rent? Perhaps. You can answer this question by citing a number of factors in favor of a particular solution specifically for Spain.
Factors influencing the changes of real estate market
Let's consolidate the key factors involved in shaping the current dynamics of the Spanish real estate market. This is all what was discussed above:
- Rising interest rates;
- Rising prices for raw materials and building materials;
- Lack of land for construction;
- Labor shortage;
- High energy prices;
- Shortage of new construction with the prospect of changes only in a few years;
- A new change in the cycle of consumer demand from post-pandemic recovery to stabilization;
- Falling incomes of the population and rising real estate prices due to high demand from foreigners;
As you can understand, the market is mainly influenced by negative factors and we have indicated above that buying a home may not be the best idea. However, here are five reasons why buying a property is still the best option compared to renting:
- Taking into account inflation, buying a house can be a good way to save money, as its cost will increase in the next few years (real estate tends to grow in value when revalued taking into account inflation). You will get your own house and a good investment asset.
- Since you are the owner of a home, you are free to make any changes to its appearance and interior, structure and technical support. Including carrying out renovation work before the sale, taking into account popular trends in the market, which will increase the price of your home in the future.
- In the long term, the cost of buying a home, even with a mortgage, may be less than the amount of monthly rent payments accumulated over the years of residence.
- Emotional aspect: a sense of stability and independence.
- Today and in the coming years residential real estate will be one of the most popular goods in the world and the Spanish housing market is at the forefront of this development.
Now here are five reasons why renting may be the best option. This is in addition to the fact that this sector, so far, has fewer pockets of instability than buying:
- There is more rental housing and many objects are located in areas that are no longer available for purchase. First of all, these are central and popular tourist areas offering a significantly higher quality of life.
- Less bureaucracy and simpler legal procedures compared to the costs that will need to be carried out when buying real estate. Rent allows you to get a new home here and now, negotiating purely with the owner of the object you are interested in.
- You need significantly less savings and income to gain access to the market.
- Renting gives you more mobility. If you need to change your place of residence for some reason, then the only thing that will be required of you is to terminate the current lease contract and leave the dwelling. Selling your own home can take not only weeks, but months of your life.
- Lower tax burden.
What is the result?
Whatever solution you choose, it is important to take into account that 2023 brings with it a number of economic changes that require constant analysis and adaptation. As mentioned earlier, the situation is rapidly changing not only in Spain, but also in the world in general.