A study by the Bank of Spain recommends that the executive "review the management procedures for developable land" to try to lower the price of housing in Spain, whose high prices are attributed to the "mismatch between supply and demand", in a diagnosis that coincides largely with the postulates of the housing policy of the PP.
The study, "The mismatch between housing supply and demand and its relationship with prices", carried out by Lucio San Juan, an analyst at the issuing bank, and published in its latest Economic Bulletin, points out that the Spanish real estate market is characterized by the shortage of supply and strong demand and that both factors have worsened after the pandemic, which will neutralize the reduction in prices that the rise in interest rates may have.
In fact, the study points out, an increase in the mortgage rate of one percentage point will reduce new construction permits and home sales by 11% and slightly more than 3% after two years, but it would have "an effect of one lower magnitude in the case of prices (somewhat less than 2% after two years)”.
The study attributes the resistance to falling prices, on the demand side, to the buyer's profile, which it defines as "high-income, middle-aged households (between 30 and 49 years old) and higher levels of education" who do not they depend excessively on credit to buy and who also accumulated savings during the pandemic. To this effect will be added in the coming years an increase in the number of households due to the increase in immigration.
On the supply side, on the other hand, the study highlights that prices are being pushed upwards by the scarce availability of housing, which is also rigid in the short term, and by the increase in the costs of materials and labor .
According to the issuing bank, during the pandemic the mismatch between supply and demand improved, which was temporarily reflected in price drops, because the supply of homes increased due to an increase in those sold from inheritances (which reached their all-time high in 2021), while demand fell because travel restrictions reduced purchases by foreigners.
After the covid, however, demand has increased and purchases by foreigners skyrocketed (they were 40% higher in 2022 than in 2019), because purchases for second homes have been added to those who have installed in Spain to telework, while national buyers looking for different homes (larger and with outdoor spaces) have increased.
At the same time, the offer has been reduced due to a decrease in housing construction – which was already low before the pandemic – because during the confinement works were temporarily stopped and the processing of visas was delayed. Thus, the study points out, completed homes fell by 5% in 2022, to 80,000 units, well below the construction carried out in the previous 30 years, in which the average exceeded 240,000 homes per year. In addition, the study points out, the offer is also low because since 2021 the number of owners who have decided to dedicate their homes to tourist uses has increased.
The study by the Bank of Spain also highlights that there is a stock of close to 450,000 unsold new homes, from the years of the real estate bubble, which has practically not been reduced since 2018, which it attributes to the fact that it is no longer adequate to the preferences of current buyers, due to its location, or because it does not meet the requirements of greater size, open spaces and energy efficiency that are demanded today.
