Author: Valentín Bustos

Source: El Español

The year 2022 ended with an annual increase in new and used housing prices of 8.8%, according to Tinsa. In the specific case of used housing, according to Idealista, the increase was 5%, while rent prices grew by 8.4%. And what will 2023 be like? Well, it can be said that “you can’t please everyone.”

“Prices will probably cool down and take a stable path,” says Francisco Iñareta, spokesperson for Idealista, regarding the sales market. Meanwhile, in the case of rentals, he is emphatic: “Without policies that encourage new products on the market, prices could be doomed to continue rising, making access to housing even more difficult for those who need it most.”

How much could sales prices cool down? Iñaki Unsain, a real estate personal shopper, predicts a 10% drop in the number of transactions and a 5% decrease in prices. However, “it will affect the available supply unevenly.” These figures are shared by Tecnotramit. Vicenç Hernández Reche, its CEO, emphasizes that “far from being a negative forecast, this is good news for the industry. The price drop gives the market breathing room and prevents a new real estate bubble from occurring in the future.”

As for rentals, the measures taken by the Government (extending the 2% cap on renewals throughout 2023 and freezing prices for six months for those expiring before June 30) will reduce the supply. And, therefore, they will increase the price. By how much? Around 5%.

“The vulnerable groups, those who are supposedly protected by these measures, will be the most affected. This reduction in supply will make it even more difficult for these families to access housing,” says María Andreu, general director of the Rental Housing Owners Association.

Financing

The key point that will define the behavior of the home sales market in 2023 will be financing. The ECB’s rate hikes, the rapid rise of the Euribor, the cost of financing for banks, and its impact on new and existing mortgage holders will be crucial in the sector’s behavior.

“In the coming months, there will be a logical decline in interest in buying homes in Spain due to the high real estate activity of recent years and the rising cost of living and mortgage financing,” indicates Hernández Reche. “Although we will likely continue to see strong dynamism in the switch from variable to fixed mortgages, which will mitigate the impact,” adds Francisco Iñareta.

Mixed mortgages will also gain prominence in this “playing field.” “They will continue to be one of the best alternatives for consumers during the coming year,” Iñareta adds.

The reduction in the number of transactions will result in the sector beginning to return to around 500,000 homes sold in the year by the end of 2023. In 2022, that number exceeded 600,000 homes.

In this way, the supply of housing available on the market will stabilize, after having fallen by 7% last year. “Sales times will very likely lengthen, and buyers will have options to choose from again. It will not be a homogeneous process, and the areas with less demand will notice it sooner and more strongly,” they clarify from Idealista.

“Home prices will fall during 2023 and begin to recover in 2024,” says Iñaki Unsain. Therefore, despite the current macroeconomic scenario, real estate has continued to show great resilience. “There is still a natural tendency to establish real estate as a safe haven,” remarks Hernández Reche.

Lack of Supply

More than the government measures aimed at containing rental prices, the key element that would define the evolution of the rental market will be the lack of available supply. A stock that continues to decrease: in 2022, by an average of 25%. In the most dynamic markets, above that.

“While demand continues to grow, the supply of housing is being drained without the replacement of homes whose contracts are ending,” says the spokesperson for Idealista.

Why is the supply deflating? The answer is insecurity. On one hand, the difficulty of quickly recovering the property in case of non-payment or occupation. On the other, the legal uncertainty of measures from regional governments and the central government.

“There is nothing to suggest that this trend in the decrease in available housing supply will reverse in the coming months, although an optimistic forecast could speak of a slowdown in the current bleeding,” indicates Francisco Iñareta. And he adds: “The current economic uncertainty we are experiencing could somehow delay decision-making by potential tenants, prolonging the presence of homes on the market.”

In addition, what looms on the horizon is the approval of the Housing Law. “If approved, it will continue to contribute to the destruction of supply and the increase in prices. Furthermore, the conditions for tenants to rent a home will become increasingly demanding,” says José Ramón Zurdo, general director of the Rental Negotiating Agency (ANA).

In conclusion, housing (whether purchase or rental) will experience a different moment in 2023 than in recent years. It remains to be seen how inflation evolves plus the various measures from institutions (ECB, Government…) to define the behavior of a market that had regained strength.