The Spanish real estate sector is going through a cycle change when two alarming circumstances converge for the market: inflation, which is now approaching double digits, as well as an increase in interest rates, which has led to the fact that the Euribor index has already exceeded 3%. In view of this, it is worth analyzing whether investors continue to invest in housing and where exactly their money is directed. What bets are they making on Spain in a potential recession.
Inaki Unsain, a leading prominent private investor in real estate in Barcelona, recommends investing with an eye to the future, however, taking into account the need to make high profits in the current situation. In turn, Jesus Reglero, head of the Department of the Master's degree in Financial Management at the OBS Business College, predicts a reduction in demand, since today investors have to make more financial efforts when buying real estate and, as a result, strive to extract higher incomes by increasing prices and rental rates.
Despite this and some uncertainty, Unsain still believes that good investment conditions still remain, since it is possible to protect the savings achieved with a well-balanced and reasonable approach. In his opinion, it is at such moments as those that can be observed today that real estate acts as a safe haven for funds and a promising asset for earnings. He is sure that investing in housing during periods of recession is a great opportunity to get good opportunities and long-term profits.
The Idealista real estate portal claims that on the side of Spain specifically is the climate, good infrastructure and communications, as well as more affordable housing prices than in other European countries. If it becomes difficult to rely on local demand, there is always more than a significant foreign buyer. The most numerous of them are the British, Germans and French. At the same time, over the past year, the number of operations carried out by the Dutch, Norwegians and Irish has doubled. Foreign demand for Spanish housing is growing.
It is also necessary to note the reduction in the cost of money in bank accounts in conditions of inflation. Unlike bank accounts, real estate has the properties to revalue its value, following the trends of inflationary price growth. Even without performing any actions with the purchased real estate, simply due to inflation, the money invested in it will be multiplied by the total. It is especially advantageous for small investors to buy real estate in times of crises and inflation precisely because of this property.
Unsain notes that the most popular asset now is small-sized real estate - apartments in residential complexes with elevators, with an area of 40-50 sq.m., with one or two bedrooms and located in areas with high rental demand and a long period of revaluation.
What should be considered before investing during a recession?
Investors should exercise caution and at the same time it is important not to jeopardize their own financial security, to avoid the risk of default.
Unsain emphasizes that the market usually becomes volatile during a recession. Selling assets during a market downturn can harm a long-term growth strategy, since selling in a panic leads to losses. It is necessary to be patient and wait for the market to recover. Usually it will take from 5 to 10 years.
According to him, today small investors are focused on cities such as Madrid, Barcelona, as well as popular coastal areas and their capitals. But there are other directions. Thus, according to the agency Tecnocasa, 29.7% of transactions for the purchase of housing as an investment occurred in Valencia this year. This is slightly less than in 2021 (30.6%), but still an impressive figure. A large proportion of small investors buy housing for the purpose of earning money by renting.