Despite the market downturn at the end of last year, at the beginning of 2023, residential real estate prices in Spain kept from falling. In some aspects, prices and sales volumes have even increased. Representatives of the real estate company Engel & Völkers indicate that, in their opinion, a change of cycles is coming in the Spanish housing market, but we are not deep enough yet to fix it. In any case, after eight years of constant growth in sales and prices, exhaustion had to come.
Juan-Galo Mosier, President of Engel & Völkers for Spain, Portugal and Andorra, pointed out at the presentation of the report for 2022 that the dynamics demonstrated in 2022 can no longer be maintained in the market. Especially in the current context of high uncertainty in the economy. The increase in the cost of credit financing has led to the fact that most Spanish buyers have chosen a wait-and-see position and do not participate in the market.
Gonzalo Bernardos, professor of economics at the University of Barcelona, called the figures of the upcoming recession in the real estate sector. The minimum decrease in transaction volumes will be 15%, and the price drop will be 5%. Inflation will play a role, but rising interest rates will have a greater impact.
The bottom line is that the impact of an increase in the key rate on lending does not have an immediate impact. Usually there is some lapse in reaction time — about six months. That is why there is often criticism of the current policy of the ECB or the US Federal Reserve, which do not take breaks to look at the real consequences of their actions, postponed in time.
In turn, Bernardo believes that although the first manifestations of the global banking crisis, illustrated by the bankruptcy of Silicon Valley Bank (SVB) in March 2023, is a good sign for the real estate market. The revealed problems with the largest banks on the planet, including Deutsche Bank and Credit Suisse, may lead the Central Bank to curtail the policy of raising interest rates. This development will not reverse the recession for the real estate sector, but it will definitely make the whole process less painful.
The adjustment predicted by both Engel & Völkers and Bernardos will not be uniform for the entire market. In the field of new housing, Bernardos does not expect a decline. As the professor points out: "Problems with stocks, sales and prices should not be expected, because developers have no more of them left. Almost everything was sold in 2022 or sold out in advance for 2023-24". Volumes have nowhere to fall, and prices are kept at the top due to an exceptionally heavy shortage of offers.
According to experts, the premium housing segment, which is a specialization of Engel & Völkers, will not suffer either. Constanza Maya, Head of E&V Development in Spain, emphasizes: "This market operates according to rules completely different from the rules of the usual real estate market. He is always more resistant to economic and political shocks".
Most transactions in this market segment exceed 2 million euros and buyers usually do not resort to credit facilities. However, Maya emphasizes, the current situation and the upcoming recession will have some impact on the market. But it is difficult to say what the impact will be, and it will obviously be insignificant, in comparison with the behavior of the usual real estate market.