The rise and fall in prices of housing does not happen by magic. The main condition for price movement is the balance between supply and demand.
When the number of people who want to find real estate in a certain area increases and the district does not increase its real estate stock, there is an imbalance of supply and demand. The first exceeds the second, which leads to an increase in prices.
Similarly, the opposite is true. When the stock of available supply is relatively large compared to the number of interested buyers, the cost of the purchase price, as well as rental rates, will decrease.
In view of this, it should be clear why the coronavirus pandemic has weakened the pace of price growth in large cities, a pace that has been growing continuously until 2019. The impoverishment of the population, the cessation of migration from the provinces to the cities and the slowdown in the influx of tourists led to a moderate decrease in the cost of residential real estate in 2020 and 2021 due to a reduction in the number of buyers.
As the pandemic begins to subside, the economy also begins to recover. At the same time, the patterns that were observed in the market before the pandemic are being restored. In view of this, it is worth taking a look at the latest real estate report from DWS, the asset management company of German Deutsche Bank.
The report indicates that in Europe as a whole, the markets lack up to 1.4 million real estate units. But in Spain, the problem is of such a deep structural nature that in order to overcome the shortage of supply and return to the point of balance, the country needs to create more than 500,000 units of residential real estate.
This calculation was made by comparing the change in the number of residential real estate in the period from 2011 to 2020 with the total number of real estate under construction for the same period.
Among the major European markets, only a handful can be recruited, in which the pace of housing construction clearly outpaced the pace of household formation. This is the case in France, Norway, Denmark, Finland and Portugal.
On the other hand, Germany, the UK, the Netherlands and Sweden have the same problem as in Spain: an insufficient number of new real estate compared to the number of households formed over the past decade.