The real estate sector faces a new phase in our country

Author: Iván García

Source: espanadiario.tips

Notaries have warned about the new scenario Spain will face throughout 2023 regarding housing. It appears that a new phase is opening up in the real estate sector, particularly after recent data on property sales.

In November, this metric dropped by 8.2% year-on-year, reaching 58,942 transactions. The average price per square meter rose to €1,570, representing a 1.2% increase compared to the same month in 2021.

In this context, reports from the General Council of Notaries reveal a slowdown in prices for the third consecutive month. This contrasts with what was reported on Wednesday by the rating agency Standard & Poor’s, which warned of a reduction in real estate prices for the same period.

What Will the Situation Be in the Coming Years?

They indicated that there would be “a decrease, but not a crash, in housing prices in most European countries.” This trend is expected to begin this year and extend through 2024. They also stated that there are no expectations of a significant rebound until 2025.

Therefore, the real estate market will face stagnation over the next two years. Experts anticipate that interest rates will also remain somewhat elevated.

The European Central Bank insists on maintaining a restrictive tone in its monetary policy to reduce inflation, even if it means higher mortgage costs. It appears that property prices and investment will be influenced by the increase in interest rates.

It is expected that it will take some time for “market prices and investment to fully adjust to these interest rates.” However, the situation will not affect all countries equally.

S&P’s report anticipated an adjustment that could last “up to 10 quarters, and generally, it is twice as pronounced as after a period of low rates,” according to El Economista.

Price Increase in November, Dependent on Interest Rates

In the notaries’ report, it is noted that property prices increased by 0.6% in November compared to the same month in 2021. The average price per square meter reached €1,747, while single-family homes averaged €1,264 per square meter, marking a 2.5% increase.

Regarding property sales, 15 regions saw a year-on-year decrease. Only Extremadura and Castilla y León experienced increases, with 1.5% and 1.3%, respectively. The most significant drops were in Navarra (-37.4%), La Rioja (-30.4%), and Cantabria (-22.9%).

For the price per square meter, the year-on-year increase was 1.2%. The largest declines occurred in La Rioja and Castilla-La Mancha, with -9.4% and -7%, respectively.

Decrease in Mortgages

In November, there was a significant drop in mortgage loans for property purchases. The reduction reached 8.5% year-on-year. The average amount of these loans rose to €147,833.

As seen, the substantial increase in interest rates is reducing the appeal of purchasing via a mortgage. Properties financed through this method stood at 48.2%. This trend is expected to continue in the coming months, as interest rates test families’ financial capacity.