How will inflation affect the sale and purchase of residential real estate in Spain?

How will inflation affect the sale and purchase of residential real estate in Spain?

Although many experts had predicted that the country's economy would face difficulties during the first few months of this year, today's forecasts have become more disappointing. Some are sure that the situation will last for a long time and will have a direct impact on the sale and purchase of real estate in Spain. At present, high inflation in the European market has led to an increase in housing prices, both when buying and when renting.

With the real estate market affected by inflation, which has reached a record high in the past 29 years, interest rates and the end of moratoriums, it is expected that sales growth will bring 3-4% price increases by the end of 2022.

According to Emiliano Bermudez, Deputy Director General of Donpiso, if the dynamics are the same, given that the European Central Bank has not raised rates yet, but only warned about it, there may be a decrease in effective demand. The reason for this will be the inability to purchase a home through a mortgage or delay the purchase amid uncertainty.

He also argues that the inflationary context can be positive. "But, if investments are made for resale, not for renting, the terms of sales will be longer due to the rise in the cost of mortgages."

"The danger is that rampant inflation eventually leads to an increase in the cost of building materials and financing with higher interest rates," says Faustino Garcia, a representative of MVGM.

He believes that in such cases, the economy suffers, and the capital for real estate investments decreases as a result of loss of purchasing power and rising unemployment.

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