The first signs of a turnaround in the real estate sector

The first signs of a turnaround in the real estate sector

Although, according to the National Institute of Statistics (INE), in October the number of mortgage loans increased by 13.5% compared to the same month of 2021, to 41,022 loans, the reality is that on a monthly basis - i.e., in October compared to September - home mortgages decreased by 7%, and the capital issued on credit also decreased by 2.8%.

This slight decline in mortgage loans is a very small symptom, still barely noticeable, of what all analysts have been predicting for several months, but which, oddly enough, has not yet happened. It will be relaxation, stabilization, deceleration, stagnation, crisis, who knows what adjective to use, in the real estate sector, which, nevertheless, has a start date of 2023.

Logically, this will be caused by a drop in housing sales due to rising mortgage rates, in turn provoked by a constant increase in money prices by the monetary authorities in an attempt to curb galloping inflation, which is no small merit of the war in Ukraine and rising fuel prices. In a word, a situation that does not encourage optimism.

At its last meeting in 2022, the European Central Bank (ECB) decided to raise interest rates by 50 basis points to 2.5%, which is less than the two previous increases by 75 basis points, although in its communique it has already stated that it will have to continue to raise the price of money until it reaches sufficiently restrictive levels to ensure the return of prices in Europe to the target level of 2% in the medium term. Moreover, after this latest rate hike, ECB Vice President Luis de Guindos said that a 50 basis point rate hike like the last one could become the «new normal» for the institution for a certain period of time until it manages to set rates where, according to the European institution, they should be.

According to Luis de Guindos in an interview with the French newspaper Le Monde, «we still have to do more to contain inflation, and we have no other way out», because if inflation is not controlled, «economic recovery will be impossible».

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