Spain has been in a complicated real estate situation for some years that reminds us of the 2008 crisis and fears a future repetition. The bursting of a real estate bubble would increase the country’s economic crisis and could even lead to social problems such as an increase in evictions and debt.
A real estate bubble is born when there is an increase in the price of real estate without justified causes, a situation that generally occurs when there is an imbalance between supply and demand. Since there is much more demand for properties, it cannot be completely satisfied, and the market takes advantage of it to raise prices.
At this time, is when investors and financial institutions begin to make profits by buying for low amounts and then selling the apartments for much higher values. Here begins the vicious circle that causes the bubble to swell more and more.
Finally, as it could not be otherwise, the bubble bursts. Normally, it can occur because, en masse, homeowners who took out loans to finance their mortgages cannot continue paying them and the banks seize their assets. With this, people begin to realize that the prices established in the real estate market are not imposed on justifiable bases, and that, therefore, at any time they can fall drastically. Faced with this possibility, they stop being interested in purchasing real estate, waiting for a better time to do so, and demand plummets.
Although the current situation of the real estate market in the country makes our alarm radar go on a little, especially when we remember the 2008 crisis, the truth is that there are no signs that a bubble could burst real estate.
This is because currently the economic and financial indicators do not reflect the majority of the risk signals, because although the evolution of housing prices has been on the rise, there is an imbalance between these and the average salaries of the population. , there has not been any disproportionate increase in sales without economic reasons or in the supply of real estate. Furthermore, and above all, banks have maintained a cautious stance when granting mortgages, with stricter criteria. “All this suggests that the foundations of the current real estate market are more solid and less prone to collapse,” says Bosch.
It should be noted that the real estate market is very versatile, and everything will depend on how it evolves over the months. However, for the near future, the forecast is the same: “the possibility of a real estate bubble remains unlikely.” Of course, the risk of a real estate bubble could increase in the future if there were a significant change in the lending policies of financial institutions and these were granted in a more lax manner. Although, for our peace of mind, Marc Bosch explains that “so far, there are no clear signs that banks are adopting such risky practices.”
Likewise, we must remember that the remedy to prevent a new outbreak we already know, and it is to repeat the solution pattern of the previous crisis: from the end of 2008 to 2013, the average price of housing suffered a decrease of more than 25%. which helped to reactivate the demand for real estate and the sector will begin to recover little by little.
According to experts, during the second quarter of the year we will be able to begin to see the price of apartments drop in 2024, and they predict a stabilization trend for this during the new year. It should be noted that this decline is not foreseen as large falls in prices, but rather, after the anomalous increases that have occurred so far, the rates will simply be returning to the starting figures.
Given this, it is normal to wonder what will happen to housing in 2024. It is expected that the number of sales and purchases will continue to decline, as a result of the stagnation in demand caused by the rise in interest rates. Even so, some experts believe that it will get closer to pre-pandemic records.
Of course, we must continue to be alert to changes in interest rates and the Euribor, in order to know for sure how the property sale market will evolve.
