Author: Joaquín Hernández

Source: Vozpopuli

Amid all the noise about the real estate market, there is an undeniable fact: home sales are slowing down. And the threat to prices is simply real.

One in four potential buyers using a mortgage has paused their decision, according to the latest data from Fotocasa for December. Spain’s second-largest real estate portal estimates that the interest rate hike by the European Central Bank has affected up to 60% of potential buyers in Spain as of the study date.

The latest official data on the granting of mortgage loans—which represent 70% of housing transactions—correspond to October. According to the National Institute of Statistics, 41,022 mortgages were signed, an interannual increase of 13.5%, hiding a monthly decrease of 7% and the urgency of potential buyers to avoid the rising cost of fixed-rate loans.

These figures correspond to sales transactions processed between August and September, as the negotiation process with banks and formalization can take up to 90 days, estimates Fotocasa. “At that time, banks still offered attractive rates not too affected by the rise of the Euribor,” explains María Matos, Director of Studies at Fotocasa. More than six months ago, banks began to increase their fixed-rate offers, although they have done so relatively progressively. They have also increased the cost of switching from variable to fixed-rate mortgages by 50%.

“A more pronounced change in the trend is expected in the coming months,” assures Matos.

By October, fixed-rate mortgage signings accounted for 66% of the market, compared to 75% in April. “A more pronounced change in the trend is expected in the coming months,” assures Matos.

In any form, mortgage loans are now more expensive. The average interest rate on new mortgages rose to 2.88% in November 2022, compared to 1.54% in April, according to the latest data from the Bank of Spain. In the third quarter of last year, the average mortgage payment rose by at least 10%, according to data from the Spanish Mortgage Association.

Used and New Housing

The slowdown mainly threatens the price of second-hand housing, which represents 80% of the market and is more exposed to general trends among buyers, especially nationals.

According to the latest statistics from the Ministry of Transport, Mobility and Urban Agenda, the average appraisal value of free housing recorded an interannual increase of 4.7% at the end of September. According to the National Institute of Statistics, the revaluation was 7.6%. In any case, the price increase was below the interannual inflation of 8.9% in September, so housing, in general, would have depreciated in real terms.

On the other hand, Aedas Homes, which had been the main market driver by deliveries in the first half of 2022, saw a 16% drop in sales operations between April and October, which it could offset with a 20% increase in average prices—the inflation in that period was 9.6%.

The latest available statistics agree that housing prices have risen nominally in the last year but show different trends on real value, once inflation is discounted.

Market sources also call for caution and point out that the figures for the new-build segment for the last three months of 2022—especially those relating to the four major companies in the sector, Aedas Homes, Neinor Homes, Metrovacesa, and Vía Célere—will provide more clues about the current situation.

Globally, the largest private appraiser on the market, Tinsa, has estimated from its sample that housing (both used and new) ended 2022 with a price 8.8% higher than in the last quarter of 2021, almost parallel to inflation, which was 10.05% in the second quarter and 7.2% in the last.