Real estate prices are rising and it doesn’t look like they’re going to lift the accelerator pedal in the short termAccording to figures from the National Institute of Statistics (INE), the rebound in the second quarter of the year reached 7.8%, the highest figure in the series for two years, when prices began their meteoric upward spiral.
Increase the new house -double digits, 11.2%, reaching its third highest rate since it peaked in 2008-, just like that of usedwhich saw a 7.3% increase, its biggest rebound since summer 2022.
While this situation may suggest that the heights of the 2008 housing crisis are already approaching, the reality is that only in hot markets like Malaga, Palma de Mallorca, Madrid either The Palm Trees we have reached this point. That is to say: the to rally The optimism of the national brick, as emphasized by the leading research centers and real estate portals, still has room.
Where is the ceiling?
In San Sebastian, the 5,000 euros per square meter have already been easily exceeded, in Madrid the issue is advancing at a dizzying speed – above 4,800 in a large part of the city – and in Barcelona the acceleration is almost identical to that of the Spanish capital, with the price already exceeding 4,500. The outlook is not encouraging and risks getting worse by the end of the year.
Improving mortgage conditions will lead to a significant number of citizens entering the market who He has been waiting for years for rates to start coming down. And all this demand is going to hit a market where supply is virtually non-existent.
Maria Matos, Director of Studies at Fotocasa
House prices will certainly continue to rise throughout 2024 due to improving mortgage conditions and the shortage of existing supply. This price increase will become more pronounced in the coming months, especially in areas where demand pressure is greater, such as large capital cities and coastal areas that have a high attraction capacity.
As long as demand continues to put pressure on supply, the price will rise until it “hits the ceiling”. The buyer’s purchasing power in each area will set the limit. Currently, the price of real estate is 21.2% lower than its peak in April 2007, so it can still rise.
The previous stage of restrictive rates (2022-2024) failed to reduce purchasing demand sufficiently for supply to find a balance and for prices to tend towards stabilization.
Today, with more attractive mortgage terms and increased demand in the market, supply will have an even harder time meeting the increased buyer demand. The price roadmap will be upward until there is more supply in the market.
Leading models indicate that property prices could increase by about 3% for the rest of the year. Forecasts indicate that this increase will moderate around 2025 and 2026, with increases close to 2%. Of course, in neither case should there be a decline.
Inflation in the building materials and the minimum wage increase They didn’t help either, as these aspects mainly affected the prices of new construction.
Leticia Poole, Professor of Economics and Business at the European University of Valencia
In 2024, real estate prices are expected to increase by about 3%. In 2025 and 2026, the forecasts indicate more moderate growth, with increases of 2% per year. The key factors behind these upward forecasts are as follows.
Population growth: Demand for housing remains high due to population growth, particularly in large cities and coastal areas
Inflation and minimum wage increase: Inflation has affected the prices of building materials. The minimum wage increase affects the workforce and contributes to the increase in new housing prices.
Supply shortage: Housing supply remains limited, keeping prices high. The combination of strong demand, inflation and tight supply suggests that prices will not fall significantly in the near future.
The INE estimates guarantee that in Spain there will be create 3.5 million homes in the next 15 years. In other words, in Spain, there will be a need for around 200,000 new homes on the market each year. In 2023, according to data from the same entity, barely half will be built.
The current political climate is not helping the situation either. People’s Party and the PSOE They have still not reached an agreement on the famous reform of the land law. Far from there being a minimum of agreement on this subject between the two great constitutional forces, one could say that the distance is total.
Ferran Font, Director of Studies at Pisos.com
The forecasts we have today indicate that this ease of access to credit will make the sector more attractive and that people’s interest in buying a home will be greater.
This rebound in activity will cause prices to continue to rise, and a little more than they have been up until now. We do not rule out that by the end of the year we will see a price increase of more than 10%.
So… is there a bubble?
Even though prices are increasing in a very similar way to 2008, the The situation of the sector at the structural level is very differentThe market is much stronger, affordability ratios are better and mortgage financing is more prudent.
In fact, large Spanish banking entities, such as Bankinter, have spoken out on this issue and all rule out the existence of a bubble. In the same vein, the Bank of Spain and the Foundation for Applied Economic Studies (FEDEA).
Maria Matos, Director of Studies at Fotocasa
There is no bubble. For the conditions of proximity of a bubble to occur, certain aspects measuring risk would have to be met, such as the overvaluation of housing prices, the high household debt rate or the increase in mortgage credit, among other aspects.
The market is heating up, yes. Real estate activity has been frenetic in recent years. However, the figures are a far cry from the excesses of 2007. The production of new homes, although it has reached almost 100,000, is far from the 600,000 approved at the time of the boom. There is no overbuilding, but a shortage of inventory added to the strong demand for purchases, which is pushing up prices. It is the imbalance between supply and demand that is putting pressure on prices.
Financial institutions are in a healthy situation and on more solid foundations, since they still have in mind what happened in 2008. Today, the sector is distinguished by lower indebtedness of market agents, as well as a lower default rate and a much lower level of speculation in housing.
Moreover, today’s home buyers are more solvent than in 2008, and monetary policies are designed to avoid the excesses typical of a bubble.
On this point, the sector is clear: more new housing needs to be promoted, particularly by increasing supply in urban areas where demand is high.
Leticia Poole, professor of economics and business at the European University of Valencia.
In its real estate report, Bankinter concludes that there is no real estate bubble. They argue that the market fundamentals are solid, with affordability ratios better than the historical average and more prudent mortgage financing.
For their part, the Bank of Spain and the Foundation for Applied Economic Studies (FEDEA) affirm that, although real estate prices have increased, the same risk factors that led to the real estate bubble of 2008 are not observed.
The solution involves more new housing, facilitating the rotation of the used housing market and increasing the supply of affordable housing, among other aspects. The combination of increased supply, tax incentives and the adoption of new technologies in construction can be key to achieving this goal.
According to the main studies, almost 100,000 homes will be built in Spain during the year 2024. This figure, compared to the number of homes created, will continue to have a negative balance.
According to data from the Bank of Spain, up to 225,000 homes will be needed in the country during the period 2024-2025 to begin to ease the current tension. By 2026, this number will increase to 360,000.
Idealistic
The current market situation has nothing to do with that of then. Current price increases are supported by the very low levels of supply for sale (which have been reduced by an average of 25% over the last 5 years), the risk criteria on the part of banks have not been relaxed for granting mortgage loans. and demand has no speculative component.
