The decline in home sales has accelerated in recent months and experts no longer hesitate to call it a recession. According to a study prepared by the University of Barcelona (UB) for the real estate company Forcadell, the residential real estate market "has entered into recession in 2023" due to the rise in rates and will continue to fall in 2024. The study predicts that this year the sale of homes drop by 15%, and suffer a drop of an additional 10% in 2024. Prices, however, refuse to fall, and the study predicts only slight adjustments: 5% this year and 3% next year.
Ivan Vaqué, CEO of the real estate company, pointed out that the market is suffering the impact of the rise in interest rates and the reduction in credit given by banks. “It is a recession sought and caused by the ECB,” he stressed, so that “the sales levels of 690,000 homes that were registered in 2023 will not be repeated.”
The accelerated rise in rates "has caused the exclusion of a large number of potential buyers from the market" and that those who still buy do so "for a lower amount than last year," said Gonzalo Bernardos, professor of Economics at the UB who has directed the study.
In 2024, Bernardos assured, the market will suffer the additional impact of the slowdown in economic growth and job creation, but it is possible that it will be supported by a drop in rates towards the summer. Therefore, in his opinion, “the first semester will be worse than the second”, in which a “weak” recovery in home sales will begin.
The study predicts that the purchase of homes as an investment will remain weak, and will not recover the levels it reached in 2022 due to “legal uncertainty and low economic growth.” According to Bernardos, residential property investment “will move from the autonomies where there is price control to those that do not exist and there are no prospects that it may appear in the coming years.” In his opinion, the most affected market will be that of Barcelona and those of Madrid and Malaga that will benefit the most.
New construction housing, for its part, continues to maintain the sales price. In 2023, the study indicates, because almost all registered homes were sold off plan in 2022, before the rate increase. But also, the scarcity of new promotions supports prices. Thus, 2023 will close with the construction of 105,000 homes, "a small amount, since the potential demand would amount to around 250,000 homes, if a large part of them were destined for the middle class."
In the rental market, the expectation that there will be price control has scared away owners and they have reduced the supply of housing, Vaqué said. This has caused "a great shortage of properties", which makes it "common in large cities for there to be more than 10 interested parties for each available home. Those excluded from the market are those that the law theoretically intended to favor: families with less income ".
