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The Bank of Spain’s recent analysis indicates that, although house prices have risen considerably, there are no signs of a real estate bubble like the one in 2008. Currently, the value of housing, when adjusted for inflation, is approximately 25% below the levels of overvaluation prior to the last crisis.

By comparison, the market boom between 2004 and 2007 saw an average of 75,000 property sales per month, a much higher rate than now. However, unlike then, credit remains limited, both for families and developers, which is a factor preventing unbridled speculation. Moderation in access to credit and prudence on the part of banks are key to maintaining current stability.

A more cautious sector with less credit
The Bank of Spain report highlights that activity in the residential sector is not overstated compared to previous figures for 2008 or compared to other areas of the Eurozone. The 2008 crisis left deep marks on the Spanish economy, where the real estate bubble devastated the financial system and caused a recession that lasted until 2014.

Since 2014, housing prices have recovered value, even surpassing the 2007 peak in nominal terms. Despite these figures, the situation is far from alarming; in fact, the proportion of investment in housing in relation to GDP is around 6%, well below the levels reached in the real estate boom (8.8%) and the record in 2006, when it reached 11.7%.

High demand and insufficient supply
The increase in home sales accelerated after the pandemic, with an average of 675,000 units sold per year between 2021 and 2023, largely due to pent-up demand during the lockdown. This year, sales have continued to be strong, although they are still far from the record figures of the previous bubble.

The key difference with the situation in 2008 lies in the amount of investment and credit entering the sector. Most of the current transactions take place in the second-hand market, which represents around 90% of transactions, while before 2008 the sale of new construction dominated, accounting for up to 60%.

For a real estate bubble to form and reach critical levels, it needs to be driven by a high flow of credit. In 2007, 60% of purchases were financed with mortgages on fairly flexible terms. Today, only 48% of sales use credit, and most mortgages finance less than 80% of the value of the property. This contrasts with the times when up to 100% of the total cost was provided.

Why are prices rising?
The main problem in the current real estate market is not speculation, but the lack of supply to meet growing demand. According to the Bank of Spain, in the last two years far fewer homes have been started than needed to meet estimated demand, which has generated a deficit of around half a million units. In addition, the rise in prices is influenced by stagnant wages and the critical situation of the rental market, which further reduces supply.

In conclusion, experts rule out a real estate collapse like that of 2008, as today’s market is more cautious and less dependent on credit.