The two markets are evolving with some disparity across different districts, but the citywide average remains stable or rising, making homeownership challenging for many citizens

Author: Editorial Team

Source: Idealista

The real estate market is experiencing a period of uncertainty. For the first time in six years, the European Central Bank has raised interest rates to 1.25%, directly impacting the real estate market and affecting mortgage approvals. Additionally, the prices of new and existing homes increased by 0.4% from August to September, establishing an 8.4% year-on-year rise. In this scenario, buying or selling a home might seem risky. The German proptech company Evernest has created a guide for buying and selling a home during inflation.

Buying a Home

Do I need to buy a home urgently or can I wait? Despite a slowdown in housing price increases, they continue to rise, and it is uncertain how much longer this will last. The rise in interest rates and inflation may be temporary, but the reality is that prices in the real estate sector have been escalating for two years. The current major challenge is uncertainty, but it is advisable to start exploring the market to see how it evolves.

Is a fixed-rate mortgage better or a variable-rate mortgage? It depends. Choosing a mortgage largely depends on the type of buyer, as it is a long-term decision. Given the current market conditions, where interest rates were previously at a minimum, a variable rate is likely to rise in the short term, but it could also remain low in the long term. A fixed interest rate has no variability but always implies a slightly higher rate. Therefore, in times of uncertainty, without knowing future interest rates, a fixed-rate mortgage might be an interesting option for more conservative buyers or those who do not want variability.

What are the priorities when buying a home? Traditionally, buying a home was associated with emotional factors, where the focus was on whether the property met all needs (location, amenities, size, etc.). Currently, this is shifting towards a more rational decision, considering other factors such as community fees, potential future appreciation, long-term capital gains, taxes, etc. This is important as it will affect both the final purchase price and the future valuation for a potential sale.

Is it a good time to buy for investment purposes? Once again, it depends on the type of investment you have in mind. For investors, long-term profitability is key, and this requires considering many factors, from the initial investment to maintenance costs (renovations, repairs, community fees, special assessments, etc.), as well as taxes associated with both the purchase (ITP, VAT, IAJD) and sale (IRPF, Municipal Capital Gains), in addition to the annual property tax (IBI). Among real estate investments, the most common for small investors are buying a property to rent out or to renovate and sell. Given the current situation, the choice will depend on short, medium, and long-term interests and sector knowledge.

Selling a Home

Is it a good time to sell a home? Despite economic uncertainty, the real estate market remains in good health. Price increases are not expected in highly populated areas, such as major cities, where the market is much more active. However, price adjustments may occur in less demanded areas. Therefore, generally speaking, it is a good time to sell.

What is the best strategy for selling a home? The most advisable strategy is to sell at a realistic market price. This means understanding the market, knowing the prevailing prices, and what is realistic considering both the current situation and future prospects. Selling a property takes time; the average is six months, though Evernest’s digital tools can reduce this to 90 days. This reduction in time is crucial, as it minimizes the risk of price drops in the short to medium term.

Is it worth renovating a home before selling it? It is definitely worth it. A renovated property means the buyer will have an easier time starting to use it, with less post-sale investment required, and it facilitates the sale. A renovated home also has a higher market value, and the price difference is usually greater than the amount invested in the renovation. This appreciation largely depends on the location; for example, according to Idealista, a renovated home in Madrid can increase in value by up to 25%, and in Barcelona, up to 31%.