The data confirm the end of the golden era experienced by the residential market during the pandemic, but “a dramatic drop in sales” is not expected in the second half of 2023. What’s more, according to Sociedad analysts of Tasación, the upward pressure on prices will continue until the end of the year as a result of the lack of supply, especially in the new construction segment, and the solvent profile of the current home buyer: two factors which will act as a containment dyke against the effect that the increase in financing costs due to the rise in interest rates may have on the sector.
“We will continue with very good and reasonable figures”, said yesterday Consol Villanueva, director of institutions and major accounts of the society, in a meeting with the press to analyze the evolution of the real estate market. He emphasized that although it is true that since the beginning of the year the increase in the price of housing is slowing down, the forecast is that in the case of new construction it will continue to rise, although “in a more moderate” due to the mismatch between supply and demand. A more accentuated trend in population “attraction hubs” such as Madrid and Barcelona, ??where 16% of the production of new homes is concentrated. However, this percentage “is not sufficient to respond to the population flows towards the big cities and the creation of new homes”, added Villanueva.
Despite this sustained demand, construction in Spain is six times less than 15 years ago. In this sense, data from the Ministry of Transport, Mobility and Urban Agenda say that the number of new construction visas stood at 108,985 at the end of last year, a figure very similar to that of the previous year, but a far cry from that recorded in 2006, during the real estate boom, when 865,561 visas were issued.
Another factor that pushes prices up is construction costs, which have risen by 8% in the last year and by almost 27% since the months before the outbreak of the pandemic. However, “at the moment it is not being fully transferred to the sale price, which is rising gradually”, despite the fact that in protected housing “it has a direct impact” because the module – maximum sale price – is not reviewed since of 2008 in many autonomous communities and the majority of homes of this type that go on the market continue to be privately promoted, explained the management of Sociedad de Tasación.
To put an end to the tension in prices, according to Villanueva, the solution is to increase the supply of new construction, with a special focus on sheltered housing, since it currently only represents 10% of the residential properties that are they build A percentage that has been decreasing compared to other times, when it came to represent almost 30% of the total housing that was built, as happened in the period 1993-1997, when 300,000 homes were produced with some type of protection, a figure much higher than the 40,000 units that have been produced in the last five years.
Likewise, the appraiser anticipates that the drop in transactions and the granting of mortgages will affect the used housing market to a greater degree, which represents the majority of the supply and sales of housing that are signed. In this segment, the tension in prices is lower, but, even so, they continued to grow in the first semester, with a rise of 4.1% year-on-year, to an average of 1,801 euros per square meter in June. An increase that was more intense in first-hand housing, of 6.4%, up to 2,809 euros per square meter. These are figures that contrast with the fall in sales – in April they were registered almost 21% less than in the same period of the previous year – and the decrease of 32% in the granting of loans for acquisition of housing, according to data from the General Council of Notaries.
“Demand remains very active”, assured Villanueva, which is conducive to the residential market resisting the onslaught of the tightening of financing conditions, thanks in large part to the “solvent profile” of the buyer, with enough savings to not having to ask for a mortgage. A situation in which 38% of home buyers were in April, the highest figure since December 2020. Despite this, the low dynamism in terms of transactions is starting to take its toll on the used housing market , which results in an increase in sales times.
