The explosive growth of housing sales in Spain, together with the increase in the cost of production of new facilities, for example, due to a shortage of building materials, forced the prices of residential real estate in the country to actively grow in the last two years. If in 2019 the annual price growth barely reached 4%, then only in Q1 2022 prices increased by almost 10%.
The local market has not seen such an indicator since the beginning of 1991, as detailed in the latest monthly report of the European Central Bank (ECB). However, the bank points to the possibility of falling housing prices in the eurozone over the next 2 years due to higher interest rates on lending.
Will prices fall in Spain as well?
The specialists of the HelpMyCash platform for the selection and comparison of banking offers indicate: "It is difficult to make forecasts in the current, extremely uncertain situation. However, the general consensus is that in the short term, prices will moderate their growth, at least relative to the pace that was demonstrated earlier".
The lack of housing stocks, at the same time, will not allow real estate to fall significantly in price, as demand remains extremely intense. This is confirmed by the data of the Atlas Real Estate Analytics study, which indicate that the peak of the Spanish housing stock fell in October 2020. Then the volume amounted to 700,000 residential units. Already in July 2022, the volume on the market decreased to 640,724 residential units.
During the pandemic, many Spanish households accumulated excess savings. This, and the low interest rates on mortgage lending supported by the ECB, allowed a large number of people to start buying new housing. It was from this period that the intensive growth of residential real estate prices in the country began.
Now the situation is changing. Households do not have so many funds, credit instruments are becoming more expensive. This will lead to a certain decline in demand, but experts point out that the situation will not repeat the events of 2008. Then a colossal imbalance between weak demand and oversupply led to the collapse of the real estate market.
In the current situation, such consequences are not expected, which will be facilitated by the already mentioned reduction in the housing stock. Fresh PMI index data from the real estate appraisal company Tinsa, construction permits issued by the Association of Real Estate Appraisers in May fell by 14.8% compared to 2021.
The rules of the game in the real estate market are changing. According to HelpMyCash experts, in the next few months we can expect an increase in the average time of sale, as well as price adjustments on all real estate portals. There is also another nuance of the current and future pricing in the market — the margin.
As a rule, the initial value of the property is 5-15% higher than the final sale price. This is due to several factors, but the most common is the emotional value that owners attach to the property. This margin should also be taken into account when analyzing the market.